Ryan seems upset about my spelling.I know Ryan never makes mistakes.So,thats why short sales are being with held.What bank did you work for?

Regardless each bidder’s financial condition (down payment amount/ excellent credit score/ contengencies…)?
For example:
Bank’s target price is $350K. Two offers received from two possible buyers.

Buyer A: Offer $352K, 5% down, credit score good 750.

Buyer B: Offer $350K, 20% down, credit score Excellent 803.

Which one would be in favor of by the bank?

Often times an agent will list a home as a potential short sale and state the asking price too low. A short sale list price normally has no connection to the actual price a bank may accept. The list price may be too high to pull in an offer or too low for the bank to accept. The house needs to be listed at an appealing price to entice an offer from a prospective buyer, but not too low that the bank will inevitably reject it.

The seller may not qualify for a short sale opportunity. If the seller is asking for debt forgiveness and they have assets they are at a disadvantage if they are unwilling to work out a repayment plan with the bank. The bank will want to see documentation of their current financial status and a hardship letter from the seller that explains why they can not afford to continue making mortgage payments. The seller needs to explain what hardship they have suffered. Just wanting to walk away and get a cheaper house is not a reason to do a short sale and most likely the lender will deny the short sale request.

The downfall may also be on the buyers end. The desire that many prospective buyers have to purchase a home at a great (below market) price and the financial means to do so are two different are not contingent on one another. It is important to have a qualified buyer before an offer is made. Banks will require proof of funds or pre-approval letter at the time an offer is made. They want to see ability to obtain financing before starting any negotiations. If a buyer is unable to prove funds, the offer will be objected immediately.

It is extremely important to have assistance putting your short sale package together to submit to the lender. These lenders are overwhelmed and understaffed. If the package is not labeled or not packaged as they instructed, they may reject the short sale just because it did not meet their specifications. It is vital to include all the required documents at once. Although it seems simple, this may be the most common pitfall in rejected short sale offers.

There are many reasons why banks reject short sales. Short sales occur when a bank agrees to accept an amount for the sale of a home that is less than the balance owed. Typically, a highly motivated seller is looking to unload their mortgage obligation and avoid foreclosure.

The three most common reasons a property does not qualify for a short sale are: the offer price is too low, the buyer does not qualify, or the seller does not qualify for the short sale.

The Offer Price is Too Low

Typically, the bank will require an appraisal to establish the value of the home before going forward with any approval. The bank may also request a broker price opinion (BPO) be performed instead of the full appraisal.  A BPO measures the home’s value by looking at the comparative sale prices of three recently sold homes in the neighborhood. This process is usually quicker and cheaper for the bank and is common with short sales.

Should the offer price be significantly lower than the BPO, a bank is less inclined to accept the offer for the sale of the home. It is the bank’s discretion whether or not to accept the terms of the offer.

A bank will typically weigh the cost to sell, cost to hold and foreclosure costs when making a decision to sell a home.

The Buyer Does Not Qualify

A bank will require evidence that a borrower qualifies for the home before accepting an offer from them. A borrower must be financially capable of purchasing a property. The items a bank will typically ask for are:

Credit report Evidence of sufficient assets to close transaction Preapproval lender from lender with sales price specifically detailed The Seller Does Not Qualify

If the seller is involved in foreclosure proceedings, the bank may consider holding the property. If the bank has already invested money into the foreclosure, they may want to hold the property and try to sell it themselves in the open market.

A seller should work with their lender to avoid foreclosure proceedings and keep all lines of communication open. A seller should contact their bank’s loss mitigation department and find the representative that can assist them. Once the relationship has been established, communicate regularly about pending offers to keep the bank from beginning the process of foreclosure.

If you are a buyer, keep in mind that a home listed as a short sale is not necessarily approved by the bank. The short sale advertisement does not indicate that a bank has approved a sale.

The typical uneducated real estate investor in todays market is running like a acared rabbit away from any deal that doesn’t have tons of equity instead of trying to be a bit more creative in structuring the transaction for the benefit of all involved. Yes, including or friend the loss mitigation officer at the bank.
It is my opinion that in this market you would be hard pressed to find a bank that won’t do a short sale if shown what they will actually save by accepting the short sale. Banks have more REOs (real estate owned) than they know what to do with at this point, they certainly don’t need to add to their pile of misery.
Remember the bank that accepts a short sale is doing this for the seller not for the investor. If the seller can justify to the bank that have have made an effort to sell the property by listing with a broker, and have been unsuccessful in getting the price need to pay off the loan it will probably be considered.
Items normally asked of the seller by the bank are a hardship letter which describes the set of circumstances that let to the delinquincy of the loan as well as pay stubs for a number of months and two years tax returns. Most banks will also require a current mini financial statement also well as a BPO (broker price opinion) which is the brokers opinion as to the present value of the property in it’s as is condition.
Presently banks will normally save between $29,000 and $31,000 if they accept the short sale in lieu of taking back the property which is now a vacant property subject to vandalism and more of a possibility of someone being injured on the property. The worse shape the property is in the more likely the bank will consider the short sale.
Banks don’t like non-performing assets, it effects their lending limits as well as their stock prices in many cases. Key point being, never exagerate the repairs needed and always be upfront with the bank as far as the condition of the property and the financial position of the seller.
Make certain the seller know that there is also the possibility the the bank will place a deficiency judgement on the for the balance owed on the property after the short sale takes place. Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, the following steps will give you a pretty good idea of what to expect.
You may need to make a half dozen phone calls before you find the person responsible for handling short sales. You do not want to talk to the work out department, you want the supervisor’s name, the name of the individual capable of making a decision.
Lenders typically do not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan.
The letter should include the property address,loan reference number, your name, the date, your agent’s name & contact information, preliminary net sheet which is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, if any.
Your closing agent or lawyer should be able to prepare this for you, if you do not know how to calculate any of these fees. If the bottom line shows cash to the seller, you will not get a short sale. Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.
If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it’s probably a good idea to explain each of those line items to the lender. In addition, the lender might want you to account for each and every deposit so it can determine whether deposits will continue.
Sometimes markets decline and property values fall. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a comparative market analysis (CMA).
When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement. Be prepared for the lender to renegotiate commissions and to refuse to allow payment of certain items such as home protection plans or termite inspections.
If everything goes well, the lender will approve your short sale. As part of the negotiation, you might ask that the lender not report adverse credit to the credit reporting agencies, but realize that the lender is under no obligation to accommodate this request.