Just because a seller accepts a short sale price doesn't mean that the lender does, and the list price may be far below what the lender wants. Banks can reject offers when the price is low, the seller or buyer does not qualify, the application is incomplete, or the loan has already been sold. A common reason short selling doesn't close is problems with documentation. For example, documents may not be drafted on time, may be missing, or may not be properly signed and dated.
With all the variables that need to be juggled, it's easy to make mistakes that end up derailing a transaction. Here are the most common reasons short selling fail. Short selling is a mix for the buyer, seller and lender. Foreclosure is a legal process that occurs when the homeowner loses property to the bank as a result of not being able to pay the mortgage.
Short selling is usually the first course of action, followed by a foreclosure auction in which bidders can purchase foreclosed properties on the spot. Another common reason homeowners can't close short sales deals with incomplete or incorrect documentation. This can include documents that aren't dated and signed correctly, are missing, or weren't written on time. Any problem with the documentation automatically suspends the process and delays it for days or even weeks.
It is best to put all the required documents in order a few days before the closing of the agreement and have them carefully reviewed by a real estate lawyer. The real trick of short selling is that you have to get the bank to accept the new lower price, since they will make the difference. In many states, the lender can seek a personal judgment against the borrower after a short sale to recover the amount of the deficit. In addition, the original lender must review the short sale offer to determine if it will accept it.
Even if the lender doesn't require you to bring cash to closing, if your short sale agreement with the lender isn't properly drafted, in most cases, the lender can sue you for a deficiency judgment after the sale. Basically, a short sale is the result of an agreement between the bank and the landlord as a way to help the homeowner avoid foreclosure. It's also important that you create a team of professionals with a lot of experience in short selling. Often, lenders demand that other loss mitigation options be considered and rejected, depending on the financial industry, to find solutions for managing homeowners' debt, for good reason before considering a short sale.
If the seller has to negotiate with other lenders, it can lengthen the process, since those banks tend to receive a greater impact on short selling. The seller must qualify for short selling and negotiate an agreement with the lender to start working. But the good thing is that most major banks and reputable lenders have streamlined their process, making it easier for homeowners to easily and quickly get approved for a short sale. Short-sale listings are usually low priced to attract multiple offers, but this does not guarantee that the property will be sold at the indicated price.
A short sale only occurs with the lender's permission when the value of the home has declined and the mortgage holder owes more than the home is worth. The service company is the one that conducts the negotiations from the bank's side and that company, in turn, must go to the lender or investor to accept any short sale. However, most banks won't evaluate the seller's request to make a short sale until there's an offer on the table. If they don't have a short selling request, find out what documentation they need to consider a short sale.