6 Reasons Short Sales Fail

A short sale occurs when a lien holder or mortgage company agrees to accept less than what is owed on a home in order for the home to sell. Lenders are not in the business of accepting less than they are owed, and their business model is not set up to efficiently work that way. That’s a major reason that approval of a short sale is often slow. When faced with a short sale, the lender’s options are either to agree to a short sale and forgive the unpaid debt or hold the homeowner accountable for the deficiency. The lender could also deny the short sale and foreclose on the home in order to sell it themselves. It’s important to note that the lender gets to make that choice, not the seller.

There are a number of reasons why short sales fail. Six of the main reasons include:

  1. The submission of an offer below what the lender is willing to accept;
  2. Deficiencies in the short sale package;
  3. Problems with junior liens;
  4. Inexperienced representatives;
  5. Seller changes their mind; and
  6. Seller fails to prove their hardship.

Short sales are more complicated and time consuming than an average real estate sale, making it important to retain an experienced real estate attorney to oversee and negotiate the transaction. Keep in mind that the banks are not reducing the loan balance, they are accepting less than the balance owed in return for allowing the home to be sold.  Therefore, it is important that you carefully review your short sale approval letter to make sure the lender has waived its deficiency rights against you. Otherwise, the bank can still sue you for the unpaid balance of the note. Special attention must be paid to all short sale terms, which are often written in favor of the lender.

Integrity Law Group has the experience to properly educate, prepare, and advise clients. We protect your rights throughout the short sale process. For more information on short sales or other real estate matters contact Integrity Law Group online at any time or call us at (206) 828-8118.