Short Sale Home » Short Sale Buyers » Top Reasons Why Banks Reject Short Sales

Unless a bank has agreed to a short sale offer up front, no one really knows if the short sale is for certain.  Seeing a short sale means the listing agent and seller are hoping for it sell as a short sale and the bank will take the offer.

Short Sale List Prices

The list price of a short sale generally has very little bearing on the actual price that the bank will accept.  The list price may be too high to attract an offer or too low for the bank to accept.  Some real estate agents will advertise short sales at unbelievable prices hoping that it will entice buyers to submit an offer.  But even though the seller accepts the offer, the bank does not have to agree to the short sale.

Short Sale Definition

A short sale is what happens when a bank agrees to accept less than the amount of the mortgage the seller owes to the lender.  If there are more than 1 loan on the property, all lenders must agree to accept a short sale.

Why Banks Reject Short Sales

• The Offer Price is Too Low:  Banks will request an appraisal and order a BPO.  The listing agent will also include a comparative market analysis to justify the short sale offer price.  If the bank believes it can make more money by taking the property through foreclosure proceedings, the banks will reject the offer.
• The Short Sale Package is Incomplete: Ask any short sale specialist and you’ll hear horror stories of how banks lose documentation.  The bank needs every single document to complete a short sale.
• The Seller Does Not Qualify: If the seller is asking for debt forgiveness, the bank will need a hardship letter from the seller to explain why the seller cannot afford to pay back the difference.
• The Buyer Does Not Qualify: A buyer’s lender will examine credit history, length of time on the job, debt ratios and a host of other criteria to determine a borrower’s qualifications.  Buyers need to submit a loan qualification letter along with the offer.
• The Bank Sold the Loan: Sometimes the bank won’t realize they no longer hold the mortgage on the property until many months have passed by.  If the bank has sold the mortgage to another lender, the bank has no authority to approve the short sale.

Tags: comparative market analysis, credit history, debt forgiveness, foreclosure proceedings, hardship letter, qualification letter