If you're buying a home through a short sale, it means that you'll be paying less for the house than the current owner actually owes on their mortgage. In most cases, short sales are an attempt for the current homeowner to avoid a foreclosure. In those cases, you'll need to negotiate with the bank that's holding the mortgage to buy the house for less than it is worth while also absolving the current owner of any deficiency on the loan amount that he or she had. While short sales are a great option in some cases, they don't always work out. Here are a few reasons why the lender may refuse a short sale offer.
The Lender Sold The Loan
If the lender sold the loan to another servicer, the originating lender may not have the authority to approve a short sale. In that case, you may have to pitch your offer to both the originating lender and the new servicer. If either of the lenders involved are not willing to negotiate, you won't be able to close the sale. Sometimes, having a real estate lawyer involved in those negotiations can make the lenders a bit more willing to discuss options.
The Buyer or Seller Cannot Qualify
In order for you to secure a short sale agreement, you'll have to be able to show proof that you can finance the home purchase. If you cannot qualify for the mortgage or don't have documentation that you're pre-qualified, the lender is likely to refuse the deal.
Additionally, the seller needs to meet specific guidelines in order to be eligible for a short sale resolution to the mortgage issues. Before listing the home as a short sale, most sellers will reach out to their mortgage company to ensure that they meet the qualifications, but if the seller fails to do that, you may find your offer rejected because the seller doesn't qualify.
The Offer is Too Low
Another common reason why you may find your short sale offer declined is if the offer you make is too low in the eyes of the bank. In those cases, you can either increase your offer or talk with a real estate lawyer about a reasonable appraisal for the property. That way, you can show clear evidence that supports your offer, or you can adjust your offer accordingly to match the appraisal and be more reasonable.
Short sales are complex procedures, and they often require the support of a lawyer like those at Bangs McCullen Butler Foye & Simmons LLP to help you with negotiation and completion. With the information here and the help of a real estate attorney, you'll be able to increase your chances of short sale success.