Short Sales are frustrating. This is a fact. After helping hundreds of real estate agents analyze and close their short sale deals, WHB Solutions has always asked why, without our help, they would avoid short sales. Many of the answers that come back were consistent with what all real estate professionals have been experiencing with short sales. The main difference in why they decided to pursue short sales was because they discovered WHB Solutions.

WHB Solutions have created a community of short sale experts and real estate professionals working with short sale transactions. It is due to our collaboration that we have been able to get short sales approved. Lender short sale approval guidelines have been a mystery, but through collaboration, we have narrowed down the lender trends and strategies that work and have clearly documented our best practices with short sales. Our short sale strategies have gotten 90% lender approvals on our short sale transactions.

The following are the top ten reasons why real estate professionals avoid short sales:

1) Bankruptcy – When a homeowner files for bankruptcy, it helps to stop a foreclosure process. A short sale can still be performed, but it requires an approval from the bankruptcy attorney to release the property so a short sale attempt can be made. This is just means extra work for a real estate professional and it may increase the time to close a short sale, but it can still be done.

2) Sellers Misleading – When qualifying a homeowner for a short sale, the homeowner must be cooperative. Many homeowners start the process of a short sale yet to cancel the transaction midstream by deciding to walk away from the home or file bankruptcy. If you feel that a homeowner may not have true intentions of going through a short sale, you should walk away.

3) Multiple Lenders – We have closed short sales with multiple lien holders. For example, we had one file that was in bankruptcy, had two mortgage lenders, and five separate tax liens. It was because of a cooperative homeowner, we were able to get the short sale closed.

4) Lack of Agent Knowledge – Many real estate professionals have not done short sales and based on our experience it takes a dedicated resource handling short sales day in and day out to understand what it takes to get a short sale approved and closed. We provide all information to how a short sale needs to be properly processed for a high chance of approval and this is based on the hundreds of short sale files we have analyzed and closed.

5) Banks Taking too long to respond – As in any business, building relationships is important when working with a lender who takes too long to review a short sale file. WHB Solutions has worked enough short sale deals with lenders that we have actually been asked to send future short sale files to the same negotiator because of our proven experience. Many real estate professionals don’t do a high volume of short sales and are not able to establish any strong relationship with lenders.

6) Client Knowledge on consequences – Many real estate professionals do not know how to explain to their clients the consequences of a short sale and do not push for the homeowner to seek professional help when looking at their best options. It is this fact that causes a homeowner to not even attempt a short sale or stop mid-stream in a short sale process.

7) Lack of Communication – We have learned from the experience of multiple short sale transactions that communication has been a key factor to ensure the success of short sale transaction. Buyers were not updated with progress and end up looking for another home. Frequent touch points with the lender were not made and deals fell through because someone did not do their job and the property was sold at an auction. There are many reasons short sales fail due to lack of communication.

Consistency – Every lender has a different timeline when processing short sales and many real estate professionals have experienced inconsistent results, which causes a low level of confidence when working with short sales. All of our short sale education materials teach best practices that we have used to close our short sales that have been proven to work, regardless of the lien holder.

9) Buyers Walking – This is a major concern for any short sale transaction. Putting in hours of work, yet to have it fall apart because a buyer walks away from a deal is not a good feeling. That is why it is important to continue finding backup buyers and setting the right expectations with the current buyer.

10) Staffing/Resource Issues – It is possible for a real estate professional to single handedly become a short sale expert. But it is our opinion that the best results occur when there is a team in place. Unless short sales are 100% of your sale pipeline, one resource cannot be used to make endless phone calls to a lender to get a single transaction closed. Our short sale training materials is formatted in such a way that a single resource can work through a single short sale transaction to closure. Being a member of our short sale community will also aid to the success of any short sale file.

Full Article Resourse:  www.whbsolutions.com/blog/

I am the buyer in this situation. Other than attorneys fees, would there be any other lost monies if the bank has not approved the offer but only the property owner?

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.