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ABOUT SHORT SALES
A short sale is an agreement with the lender(s) to accept less than
the amount owed by a borrower when the property is sold to a third party. This includes two unique events:
- Net Proceeds Loss - the net proceeds from the sale of the property insufficiently pay back the balance due on the loan(s)
- Lender Agreement - the lender(s) agrees to discharge the mortgage lien(s) and remaining obligations on the home in exchange for the short sale proceeds
Contrary to popular belief, sellers do not need to be in foreclosure or be behind in their mortgage payments for a short sale to be
accepted by the lender. However, the lender may not approve a short sale for a variety of reasons:
The Offer Price is Too Low - Banks will request at least one appraisal and may also require a BPO (broker's price opinion).
If the lender believes more money can be received through foreclosure proceedings, the bank will reject the short sale offer.
Lenders do not want to have an inventory of foreclosure properties, but they will not sell them substantially below market value.
The Short Sale Package is Incomplete - Lenders can misplace documentation that has been submitted or a
required document may not be in the file. Without every single document, the short sale will not be accepted. SSA
submits only completed short sale packages to eliminate the need to “restart the clock” on the lender's processing.
The Seller Does Not Qualify - Lenders want to see that the homeowner is not able to pay their bills and
the short sale is necessary because the homeowner is faced with foreclosure or bankruptcy. If the seller is asking for
debt forgiveness, the bank will want to see a hardship letter from the seller that explains why the seller cannot
afford to pay back the shortfall difference. Sellers who have assets are at a disadvantage if the sellers are unwilling
to work out a repayment plan with the bank. It is suggested that the seller profit and loss statement and
monthly budget in addition to the hardship letter to show the seller has little or no assets and no disposable income.
The Buyer Does Not Qualify - A desire to buy a home and the financial means to afford a mortgage payment does not mean a buyer
qualifies. A buyer's lender will examine credit history, length of time on the job, debt ratios, and other criteria
to determine a borrower's qualifications. To gain credibility when submitting an offer, buyers may want to submit a pre-approval
letter to show that they truly can purchase the home.
The Bank Sold the Loan - If the bank has sold the mortgage to another lender, the bank has no authority to approve a short sale.
Although the seller may continue to receive statements from the bank, the bank may simply be servicing the loan. The
bank may not realize until far along in the short sale process that it actually does not hold the mortgage.
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