Short Sale Home » General Short Sale Info » Short Sales Fall Apart

To no surprise, many short sales fall apart because short sale buyer’s are not kept informed during the process. Is it the Realtor’s fault? Sometimes…often times, Realtors find they are working blind.

Short Sales 101

A real estate short sale happens when the total amount owed on the property is greater than the amount the lender accepts for purchase, but can only happen when the owner is delinquent in their mortgage and cannot ‘apply for or ask for permission’ on a short sale until the seller can secure a buyer and have a written Purchase Contract in place.

Negotiating a short sale is not very easy and will require a lot of work with the lender and other judgment holds to get the deal approved.

The buyer and the seller both need to know the following when dealing with a short sale:

1. The lawyer for the seller can’t submit the purchase agreement to the lender until all the contingencies are removed.  The buyer should want to inspect the property before writing an offer on the short sale.  Unlike a traditional sale where an inspect detects issues and the buyer and seller can negotiate a different sales price if the issues are great than $1500 per item, there are no further negotiations in a short sale.  Once the offer/file is submitted to the lender for approved, it cannot be altered.  At this point, the buyer has 2 choices: Inspect the property before the offer is made or inspect after knowing that this will greatly delay the lawyer from submitting the deal to the short sale lender.
2. The buyer has to formally apply for a mortgage and have it approved before the short sale lender agrees to the deal because the lawyer for the seller cannot send the short sale package to the bank without all contingencies removed.
3. Once the contingencies are removed, the lawyer for the seller will submit the deal to the lender.  Lenders are not prepared to handle the number of short sales they are receiving and the process can take around 2 to 3 weeks or even up to a few months (and sometimes even longer!)
4. The buyer needs to be ok with being a position to wait for the bank to reply.
5. Once the bank has approved the deal, the bank will expect the buyer to close very FAST.  (It isn’t fair is it?).  Once the lender accepts, they want to get the loan off their books quickly.
6. Banks do not want to foreclose.  If you give them an offer that is reasonable, they will want to work with you since foreclosing on properties is not the bank or lenders first choice.
7. Many short sale deals fall through because the buyer does not understand the process.  Hopefully this will answer some questions on why the banks take so long to approve the deal and why so many buyers need to pay for the inspection and mortgage approval before the deal is approved by the sellers lender.

Tags: banks, purchase agreement, sellers, Short Sale Buyers, short sales