It seems like a simple enough question: “how long does it take to buy a home in Silicon Valley?” (Not how long to find the perfect house or condo, but how long from the time the offer is accepted until the sale is finalized and you can move in.) The answer has a few factors which can swing the outcome one way or the other, making the escrow time frame short or long.
Variables that make home buying faster or slower:
- whether or not the seller has pre-sale inspections (with a short sale, usually not)
- whether or not the home is a condo, townhouse or PUD (and if so, if the HOA docs are available upfront or are only ordered once the offer is accepted)
- whether the buyer is only pre-qualified or fully pre-approved for a loan
- the amount of cash down – an “all cash offer” can make the sale very, very fast
- the loan type – an FHA loan will need more time to be processed and the sale will close slower
- the contingencies involved and their time frames as written in the contract
- the sale type: regular vs short sale
- buyer needs or seller needs unrelated to the transaction: they can agree on a somewhat longer escrow in the contract (purchase agreement) if so desired
- if it’s a special type of property, such as a luxury home or estate OR a mountain property, there may be additional inspections needed and it could take a little longer to close on these as well
The fastest home sales I’ve seen are the all-cash offers of houses (not townhouses or condominiums) in which the seller already has excellent home inspections (my fastest listing that sold: 5 days, all cash, buyer HAD to buy within a week or would suffer enormous tax penalties).
Most buyers today have 20% down and are pre-approved, and most sellers today in the San Jose – Los Gatos – Saratoga areas do have pre-sale inspections done. Escrows for these typical sales are running for these types of transactions close to 30 days, sometimes more like 35 days.
For FHA home buyers, most of the time it takes 45 days to close escrow once they have an offer which has been accepted. Once in awhile, it’s a little longer. Sometimes a seller may want a longer escrow for various reasons.
Status of the HOA Docs: If the property being sold is a planned unit development (PUD) or condominium, as opposed to a single family residence, it can take longer to complete the sale sometimes if the home owners and their agents have not already ordered and have in hand the home owner association (HOA) documents for the buyer to review. This very thick packet is extremely important to get to the purchaser so that she or he knows as much as possible about the community. It includes the meeting minutes (where you find out who’s upset about what), the newsletters (any big neighbor issues may be discussed), the rules, bylaws etc. It can take a week or more, in some cases, to get this from the HOA. The sooner the buyer sees it, the faster the sale can go.
In general, 30-45 days is the “normal” amount of time for most Silicon Valley residential real estate sales to close. This is what you’ll most likely find in a regular sale or a normal property.
Sixty days is considered a “long escrow”. Ninety days is the absolute limit that the buyer’s lender would tolerate, but often is so long as to be inadvisable. A lot can happen in 90 days – loan rates can jump and even if you’re pre-approved, the loan rate change can lock you out of closing. Most sellers and their agents will not be enthusiastic about a 90 day close of escrow for that reason.
Ditto that for “contingent offers“., which can take quite a bit of time to close. In Santa Clara County, offers which are subject to the sale of another home are usually fairly unpopular. Home sellers frequently do not want to deal with these bids at all, but may consider them if their home has been on the market a very long time and if the home which needs to be sold seems to be very marketable. (For more information on contingencies of all kinds, please read Competing Against Multiple Offers: Contingencies and Timeframes.)
Bank owned properties, or REOs, tend to close within the normal time periods. However, the banks often are not as generous as “regular” sellers and may permit only 7 days for inspections even if the buyer legitimately needs more time. (Caution: banks often utilize passive contingency periods rather than active, meaning that if you say nothing and the date passes, you are presumed to be moving ahead with the sale and if you decide not to complete the sale you could be in default.)
How long does it take to buy a short sale in Silicon Valley?
Short sales are sales with a type of contingency, but instead of it being a buyer contingency (which is usual), it’s a seller contingency. In these cases, the sale is subject to the seller’s lender approving a short payoff AND of the seller in agreeing to any terms in the short sale authorization from the lender(s). How long does it take to close escrow on a short sale? This varies widely.
With a short sale, the seller is still the owner (not the bank), but the bank can say whether or not the sale will be completed – either permit it or not. Because of this power, the bank can sometimes insist on changing some of the terms of the contract, from time frames or price or downpayment that the buyer’s responsible for to the commission the involved real estate agents will be paid at the close of escrow.
How long does it take to get bank approval or lender approval?
Again, it depends on a few things:
- how many loans are there? (one is fastest, most often)
- if there are 2 or more loans, are they at the same lending institutions or at separate ones? (2 loans at the same credit union or bank will be infinitely easier than 2 loans at different banks)
- how much of the seller’s debt will have to be forgiven by the lender? Often a small amount can go through a more streamlined process than if it’s a large amount and may even be worked through a separate department
- whether or not there was a prior sale that fell through – if yes, then the paperwork is probably in the system and the lender just needs another seller to step in accept the prior terms. In those cases, it may be very quick.
The fastest I’ve seen short sales approved by a bank is 2 weeks and the sale closed 30 days later, so it was 45 days total. That is lightening fast and atypical. More often, if there’s only one loan it takes the lenders 30-60 days to respond to the offer which has been accepted by the seller. If there are 2 or more loans and they are not all at the same credit union or bank, it could take much longer to get an answer. Sometimes there is no answer at all…. This is extremely frustrating and should not happen.
For more reading on the topic of short sale escrows and closings, please also review this article:
“Short Sales Sell But Often Don’t Close: Why?”
If you are buying a short sale, it’s imperative that you be flexible as to the closing schedule because so much of what determines it is beyond the control of buyers, sellers and agents. Once you get that bank approval and the seller agrees to the terms, then it should proceed like a regular sale in terms of time frames.
