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Why do some short sales with loans from the same bank get approved while others don’t?

 

Why do some short sales with loans by the same bank in the same developments get approved while others are denied?

 

The world of the short sale is changing on a daily basis, and what you know today will be different tomorrow. The rules change, the players change, the documentation changes every minute.  There is, however, one constant: you do not always know whether a short sale will close or not.

 

Two years ago only about 5% were closing, now that number is more like 50%. Still, it's quite risky for buyers and sellers to get their hopes invested in a successful short sale when the odds are 50/50.  There are some things you can do to help insure the process has the best chance of closing.

 

In general if the following are true then the chances are better:

 

1.     The realtors on both ends know what they are doing and have the time, energy, and resources to follow up to set expectations appropriately.  The buyer can not be in a hurry!

 

2.     The fewer the liens the better. One loan is best, two loans with the same bank is second, two loans with two banks third, two loans with other liens such as taxes are probably not going to work out.

 

3.     The short sale process was started before a notice of default was filed.

 

4.     The buyer is well qualified.

 

5.     The home is owner occupied.

 

 

None of these things will guarantee a positive result, but they help.  The biggest problem in the short sale process comes from third parties who are not the bank, but either investors that purchased the loans like hedge funds, or insurance companies who insure the loans for the banks (not mortgage insurance for the borrower).

 

These entities can derail a short sale, and it is not possible to know if they exist, or what they will say before the process begins, unless of course you are dealing with a bank approved short sale--but that is a different story.  So the lender may appear to be Bank of America or Chase, but the investor who put up the money maybe someone else and if so they have to agree to the price and terms.  Or sometimes the second lender will get more money in a foreclosure and will not agree to release the lien.  When this happens, what appears to be an irrational move by the bank, may have nothing to do with them.

 

These are a few of the reasons why seemingly illogical things often happen in the world of short sales.

 

Marcy Moyer

Keller Williams Realty

DRE  01191914