Why Are Some Short Sales Not Successful?
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I know... banks are not in the business of selling homes. All they want to do is lend money and make profits. So, 'why will they not allow me, the seller, to proceed with a short sale?' Or the buyer may ask, 'why won't they just accept my offer?'
As previously mentioned, not all lenders participate in short sales. In addition, not all homes and not all sellers will qualify for a short sale.
A few other reasons a lender may not approve a Seller for a short sale:
- The Seller makes too much money (positive cash flow)
- The Seller is not yet behind on payments
- The Seller has excessive assets
- There is equity in the home
- The lender simply does not participate in short sales as a matter of policy
- The mortgage is insured
- The Seller has not yet received FHA counseling
- The planets have not yet all aligned
OK... so the Seller and the home qualify, and there is a bona fide offer on the table. Why will the lender not accept the offer? Oh boy, there are many reasons. Too many to list. However, here are just a few:
- The lender feels the home is worth more than your offer
- The lender still feels the home is worth more than your low-ball offer
- The lender really still feels that the home is worth way more than your ridiculously low offer
(Starting to get the point?)
It all comes down to the numbers. More often than not... if a Seller has been approved for a short sale, but the offer is not accepted, then the lender feels that they could get more money if they foreclose and resell on the open market than if they allow a short sale to proceed.
As strange as it seems, not ALL lenders are willing to accept peanuts for vacant or underperforming homes. It's a numbers game. And if you are in the game of low-balling offers - or if you think you are going to find a short sale and make tons of cash, you may want to reconsider.
More recently though, we have seen a large number of short sale requests go unanswered. Since the recent announcement of the 'Government Bailout' package, lenders are simply waiting. Waiting to see what THEY are going to get. Waiting to see what everyone else does. Waiting until something. Most recently, it may even take an act of Congress (literally) to get your short sale accepted, completed and out of escrow.
And now that the US Treasury has responded with the new HAFA program, things may just begin to speed up.
We don't want to put the damper on everyone's fun, but please just remember:
- Short sales are frustrating and aggravating
- Short sales may take a long time
- Some short sales may never be completed
- Some short sale offers are never received by the lender
- Always have a professional leading the way
- Always seek legal and tax advice on the consequences of short sales
- Lenders are not ALWAYS looking for the easiest way out - this means they are not ALWAYS willing to accept less than what is owed. Even in this economy, lenders don't want to lose money. And if they feel they can get more money as foreclosure, they are more than willing to wait. HINT: Gold Diggers, save your time and keep your offers REALISTIC! You never get something for nothing.
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