Baltimore Short Sale

Top 5 Reasons Banks Reject Short Sales

Short sales are becoming more in-demand through time. Because of the unsightly economic turmoil and recession, homeowners are not given any option or alternative as to what could be done with their falling financial status, thus thinking of applying for a short sale might appeal to them as their last resort.

While you are still planning mwhether to continue submitting an application, there are things that you need mto learn for getting your application approved by banks and to avoid being rejected. Below are the five most common reasons why banks decline a seller’s request. These are the things that you must avoid.

1) Price lists of short sale

In most cases, when a property is listed on a short sale, it has a great tendency to be advertised at a very low price. So low, that any bank and potential buyers would not accept it. Sometimes sellers or homeowners mistakenly think that selling the property at an unbelievably cheap price would attract buyers and banks immediately.

Homeowners do not realize that banks are constantly monitoring or looking at the price range of every property offered to them as a short sale. Legally speaking, banks would hire a specialist for broker price opinion (BPO) or would need to have an appraisal for the property before closing a deal. The BPO would evaluate the property and determine the neighbor’s recent home sale prices as their basis and evidence to know that the seller’s price is reasonable. If the BPO finds out that the property’s value is too low, the bank will automatically get your offer out of their list for would-be approved short sale.

There are also instances where sellers would give marked-down prices because the property already has a lot of damages that need repair. While the bank is highly capable of rebuilding the indemnities, they would often reject the short sales offer simply to avoid the extra hassle of renovating the property.

Lastly, after the BPO gathers the listings of short sale prices and determine the property’s market value, the specialist will submit a comparative analysis that shows and justifies the cost of the short sale. If the bank realizes that they could gain more money if they turn the property to foreclosure, the bank will definitely decline the short sale offer.

2) The short sale package is incomplete

Applying for a short sale requires a homeowner to complete documentations and meet qualifications. Sellers must provide a proof or evidence of their inability to pay for their mortgage anymore. Here is what the Short Sale Package entails:

Submission of a letter of hardship, bank statements, and pay stubs are also listed as the banks primary requirements to apply for a short sale. Some banks would also demand for a proof of the seller’s present condition, and other pre-requisites may vary according to banks and mortgage companies. If even one item from this package is missing, your application could be declined. So keep in mind to go over with your files many times before submitting all the requirements.

Another issue regarding missed requirements might be because of the lost documentation from the bank’s end. Try to get copies of the requirements and as much as possible, take hold of the original documents in a safe place so that whenever the bank calls your attention for a missed requirement, you are backed up with a copy to submit the missing file right away.

3) The seller does not qualify

The best qualification that the bank wants to retrieve from a seller for the short sale process is proof that one is truly incapable to pay for future mortgage payments. The bank needs to read the hardship letter the details of why a homeowner cannot afford to pay the current, existing balance. Enclose a financial worksheet, a proof of your annual income, a bank statement, and the details of your monthly expenses upon submission of hardship letter.

The bank will then assess and evaluate the application. If the bank sees an angle that you still have cash or liquid assets and are disobliging the terms to pay the mortgage in full, your application will definitely be rejected. Buyers on the other hand have to be careful when negotiating or buying a short sale from atrocious sellers, when in fact they really have money but are simply unwilling to pay the amount of mortgage in full.

4) The buyer does not qualify

Banks monitor buyers for a particular real estate short sale. Upon the request of the buyer to purchase the property, he/she must also submit evidences that he/she is 100% capable of paying in full, the amount of property plus the interest rates. Potential buyers need to have a secure financial status, good credit, a stable job, and a hard copy of the proof of sufficient assets to close the transaction. If the bank sees a risk in the buyer’s status, the bank will automatically reject the short sale.

5) Banks received a better offer

While the approval of your application for a short sale is still under processing, banks are allowed to entertain other agent’s offer over their properties. If the bank catches a great deal, they do have the power to reject your application. You may have been waiting for several months now and are expecting to receive the approval, but coming across a better offer than yours; your bank may automatically lose interest of your application.

Legally, banks can still ask for more offers from other agents and sellers aside from you, and when they get a better deal, they will least prioritize your application over others. They don’t even give you alternatives or options, but rather take the better deal and forget your application altogether.

To keep your short sale application on the top list of the soon-to-be approved application, better follow the banks step-by-step instructions on how to get you qualified as a real-time seller. In order to make this a smooth transition, I highly reccomend contacting one of our Baltimore Short Sale Specialist Realtors right away. They can help you get all financial paperwork in order, and make sure nothing goes unoticed or forgotten!

Preparing a short sale Package

A short sale is one of the most sought out way through which a homeowner can avoid having their home foreclosed. Given the many advantages that a short sale has over a foreclosure, most people usually prefer it. When opting for a short sale, the homeowner will need to understand that the lender is not obligated to accept a short sale proposal. Most homeowner’s find this very frustrating because of the endless negotiations which may take a lot of time. The lack of certainty as to whether the lender will accept one’s proposal is another factor that makes some people shy away from the whole process.

Although the lender may benefit from a short sale as compared to a foreclosure, it is usually necessary to convince them that a short sale is the best alternative that they have. It may therefore be necessary to convince them of various factors which will make you eligible for a short sale. It is also wise to know that the HAFA Program (Home Affordable Foreclosure Alternative) is a great benefit to you, the homeowner, and to the lender as well. Incentives given, once the short sale has made a successful closing and upon qualification, is beneficial for both parties, giving up to $3,000.00 CASH BACK for your relocation and up to $30,000.00.  Most lenders usually have various things that one must satisfy in order to qualify for the short sale. They may require you to prove that you have undergone some kind of hardship that has made you incapable of repaying the mortgage.

Preparing a good short sale packagewill make the whole process easier and less complicated. A good short sale package will make it easier for the lender to understand all the existing realities concerning your house and thus saving a lot of time which might have been wasted trying to explain everything. Having the facts and figures about the property already documented will also enable you to make better and convincing arguments that will persuade the lender to give you the permission to make the short sale.

The first document to be included in a short sale package is your hardship letter. A hardship letter is a document that must be contained in a short sale package. When writing a short sale letter, it is important to remember that the purpose of the letter is to explain the nature of the hardship that you, as the borrower, are facing and why a short sale is necessary. The letter should outline the nature of the hardships that the borrower is encountering and how they came about. Since its purpose is to convince, it should be written in a precise but compelling manner. Outlining the reasons why it is impractical for the borrower to continue holding onto the property is also an important element of a good hardship letter. Bank statements and recent pay stubs are also necessary when preparing the short sale package. Recent tax returns for the two years preceding the application should also be included.

A letter of authorization which should be properly signed by the owner of the home is another important document. A good letter of authorization should express the intention to give the authority to another person to deal with the property and should be clear and concise. A date should be included in the letter with a specific description of the property which is the subject matter of the short sale. It is also necessary to include the loan reference number so as to make it easy for the bank to find additional information, if need be, about the property. The names of both the owner and the agent should also be specified in the letter.

In a short sale package, a preliminary net sheet should always be included. This sheet is used to summarize all the financial information about the property and the short sale in general. A good preliminary should break down all the proceeds that are to be expected from the sale of the property and the accompanying expenses. Usually, the net amount should be negative, which indicates that there shall be no profit to be made by the seller in case the short sale is allowed.

Most lenders usually require the borrower to fill out a financial disclosure form which helps them to evaluate the financial position of the borrower and whether the short sale is really necessary. It is advisable that you be honest in making disclosures in the financial disclosure sheet because any signs of dishonesty my work to your disadvantage. In it, one should disclose his or her bonds, stocks, savings accounts and any other assets that they may have.

If you are looking for help on getting your Short Sale Package together, I strongly encourage you to contact one of our highly energetic and thoroughly trained Short Sale Specialist Realtors. Our services are 100% FREE for you and after all, we are on your side! Do not let a Foreclosure put a damper on your life, when a short sale can help you move on with your life so much quicker! Act now and contact us!