subject: 4 Reasons the Bank May Reject a Short Sale Request [print this page] 4 Reasons the Bank May Reject a Short Sale Request
Clearly, the most important part of the short sale process is getting your request approved by the bank. Banks often reject short sale offers for various reasons. Before you proceed with your short sale request, it is important to know why a bank might reject a short sale request so you can prepare accordingly. Following is an overview of the reasons why banks may reject short sale request.
The offer price is to low: The bank will analyze whether it will lose less money through foreclosure or by means of a short sale of the property. They will request an appraisal or a BPO and a comparative market analysis to gain knowledge of the home's current market value. Your short sale agent should have a good pitch as to why the home is worth what it is by showing comparable sales to support the offer price. That being said, the bank understands that they are not going to get full market value of the property. By nature, homes that are short sales have a lower market value due to the time and patience it takes to buy a short sale.
The short sale package is incomplete: The bank requires many documents to be submitted. Consult with your short sale realtor to see that you have submitted every relevant document. See that the purchase agreement, the financial worksheet of the seller, the listing contract, the authorization to release information, and all other relevant documents are properly arranged and submitted. You will also have to write a compelling hardship letter describing your financial condition and why you need a short sale to clear off the debt. A complete short sale package, including an offer to purchase must be submitted. You must pay close attention to every detail. If you put together a sloppy package, you could be adding months of delays to the process, and could be in jeopardy of the bank foreclosing because of it.
Disqualified seller: If the seller has capable assets and is reluctant to work out a repayment deal with the bank, then the seller might not qualify for the short sale. You must prove that you can no longer afford this house and that if the bank does not agree to a short sale, they will face a greater future loss when they foreclose.
Disqualified buyer: Simply having a purchase contract between a buyer and seller is not enough to satisfy the lender. You will need to prove to the bank that the buyer is pre-qualified for a loan or has the cash to buy the home outright. Part of submitting a complete short sale package is sending in a loan approval letter or proof of funds to purchase the property outright.
