I have come upon this question a lot from people facing a short sale.
Though I have seen it take longer, usually the bank will set a foreclosure date within 90 days after your first missed payment. They usually have the right to do that after 30 days but it is industry standard to wait longer. The foreclosure date is 3 to 4 months after the notice.
So some ask if they can try to have the sale closer to the forclosure date so they can live for free to save up some money. There are two major problems. The first, which is the least of the two, is that 6 to 9 months of missed mortgage payments on your credit is going to severely damage your credit score. Extending the short sale until the end will leave massive damage on your credit while we are in a climate where banks are nervous to dole out credit.
Understandably you may say that you are done with credit but things happen. Your car may break down beyond the line of reasonable repairs and you need a replacement. Insurance companies have been trying to link credit scores to your insurance rates which I think is ridiculous. Someone I know was asked my their insurance agent to opt in to the program because he had high credit scores. In the last 10 months he has had a reversal of fortune and will be slammed on his rates.
Secondly if you wait too long you may lose the opportunity to actually sell your home. They don’t always come together. Specifically with all of the bad news about the economy and the stock market, few are willing to take the calculated risk that this is a good time to buy. People are doing it but you don’t want to wait it out as long as you can.
I am currently working on a short sale where I only had 5 weeks to find a buyer. If I start at too low of a price the bank may feel that I didn’t give a fair shot to market price. If I can show the bank that I notched it down over time then it helps to establish a going price. We were lucky to have a buyer pop up 3 days before the foreclosure date and the bank postponed it. But the buyer got nervous with the recent stock market news and backed out. We are coming up on another deadline and I don’t know if we will make it.
