Why Short Sale Fails Due to Bank?

Short sale failure due to bankThe success of short sale depend upon a number of factors that need to be addressed properly. If anyone of them is missing short sale would not be successful. A short sale failure may be stressful for a seller, but it is advised to be normal in case short sale fails.

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 inherited in short sales and would not have access to a quick solution, which could can make your short sale fail.

What can go wrong that make the short sale fail? Suppose that you offered a reasonable price for a short sale and the short sale is accepted, but some of the problems in a short sale happens at the closing stage of a short sale.

Top Reasons Why Short Sale Fails Near Closing.

Here are the top reasons that can make short sale fail near the closing.

Home is Vacant

Many short sale services guidelines require that the home must be occupied. There are chances that they demand the seller to move back that may not be possible for seller to do. There will be better chances of closing short sale if the seller lives in the property.

PSAs Prefer Foreclosure

There are chances that servicing guidelines might not include any provisions for a short sale. In this case, short sale may not be granted, even though it may have appeared all along that the bank would approve the short sale. It is also noticeable that PSAs earn more in case the home goes for a foreclosure to the incentives mentioned in the servicing guidelines.  

More Than One Lenders.

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.

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.

Seller Contributions

Most of the banks demand seller’s contribution to close the short sale even if the seller don’t have financial strength to pay. The bank might insist that the seller kick in cash or sign an interest-free, long-term promissory note.

Deficiency Verbiage

Many states allow the deficiency judgment in case of a short sale and don’t regardless of whether the financing is purchase money or a hardship loan. Every lender may not be agree to remove the deficiency judgment and approve the short sale. Even in situations that are exempt from deficiencies, doing a short sale might change or alter the sellers’ exemption.

Home is vandalized

Vacant homes are the best places for thieves. Water pipes may be broken and flood the home. Lighting may strike and can burn the home. It has been seen that sometime thieves breaks in, steal appliances and damages the other stuff. In this case, bank will not be paying a single penny.

Sellers Get a Job

Sometimes short sale processes may take a longer time than expected to get approved and between this duration sellers sometimes get a job. Earning a good income disqualify the hardship and short sale is rejected.

Not Every Fee is approved for Payment

There are possibilities that bank might reject to pay the credit demanded by buyer. The closing costs of buyer may be about three percent of the sale price, almost as much as the minimum down payment for an FHA loan.

UCC Filings and Judgments

A rapid checking of public records may disclose the liens filed against the home or the seller, but there are few buyers who order a title check until they get approval of a short sale. Some types of liens will follow the seller after a foreclosure and will require payment for the short sale can be closed. Normally, bank will not be paying the liens.