Why short sale fails due to bank?
The success of a short sale process depends upon a number of factors. If anyone of them is missed short sale process would not be successful. Short sale failure could be stressful for a seller, but seller should be normal in short sale process to be successful. There is a great difference between new short sale agent and experienced short sale agent. It is possible that a new short sale agent can close a short sale, but experienced short sale agents learn from their mistakes and have great skills to close the short sale. An inexperienced short sale agent might not have faced problems in short sales and would not have access to a quick solution, which could make short sale fail. Here are some important reasons that can make short sale fail near the closing.
Home is vacant:-
Many servicing guidelines require that the home be occupied they may go so far as to insist that the seller move back in, and many sellers cannot afford to do so. You will have a better chance of closing your short sale if the seller lives in the property.
Demands for Seller Contributions:-
Banks demand seller contributions all the time, even if the seller has no money and no assets. The bank might insist that the seller kick in cash or sign an interest-free, long-term promissory note.
Many states allow deficiency judgments when lenders take a short payoff, regardless of whether the financing is purchase money or a hard money loan. Not every lender will agree to remove deficiency verbiage from a short sale approval letter. Even in situations that are exempt from deficiencies, doing a short sale might change or alter the sellers’ exemption.
PSAs Prefer Foreclosure:-
It’s possible that the servicing guidelines might not contain any provisions for a short sale. In that event, the short sale will not be granted, even though it may have appeared all along that the bank would approve the short sale. In addition, some PSAs make more money if the home goes to foreclosure due to incentives in the guidelines.
Tax Liens, UCC Filings and Judgments:-
A quick check of the public records would disclose liens filed against the home or the seller, but few buyers order a title check until they get short sale approval. Some types of liens will follow the seller even after a foreclosure and will require payment before the short sale can close. Generally, banks will not pay those liens.
Bank Offers Loan Modification:-
It has been noticed that at some level bank rejects the loan modification request, but sometimes later in the process of short sale the same request is accepted by the bank, which had previously been rejected.
Home is Vandalized:-
Vacant homes can be sitting ducks for thieves. Water pipes can break and flood the home. Lightning can strike it and burn the home to the ground. But more often than not, thieves break in, steal the appliances and rip out copper. Banks often will not pay for repairs.
Sellers Get a Job:-
Some short sales can take so long to get approved that eventually the seller will find a job. Once employed and earning a good income, the seller may no longer qualify for the short sale.
Not Every Fee is Approved for Payment:-
The buyer might need a credit toward closing costs and the bank might refuse to pay it. Buyer’s closing costs can amount to 3% of the sales price, almost as much as the minimum down payment for an FHA loan. If the homeowner’s association dues are in arrears, a bank might refuse to pay those fees, among other charges.
More Than One Lender:-
A short sale agent may be treated like a ping pong ball that is bounced between the first and second lender.
• There are chances that the first lender does not agree to meet the demands of second lender.
• A third lender might not agree with other two lenders.
• Some second lenders push sellers to commit short sale mortgage fraud, which could happen if the lender demands a payment outside of the HUD-1.
The Listing Agent:-
The agent listing a property can be a major weak link if they come to the short sale process with no more experience or process than a two hour class in short sales and the thought that this is just like any other real estate transaction. If the agent does not have a team to manage and expedite weekly communications with the bank and does not know exactly how to present the numbers and the financial package to the bank it is most likely doomed from the start. You cannot manage a real estate business based on myth and assumption. The very idea that there is some kind of universal magical percentage that banks will accept on a short sale or foreclosure is just plain silly and a myth. The bank is a business and property is an asset with real financials attached to it. There are no secret percentages the unlock deals by knowing the secret 81% hand shake. These myths have no validity in the real business world.