Most Connecticut short sales go according to plan but there are a few common reasons your short sale may get denied. You do have options to get your short sale back on track.
- The buyer’s offer is too low. Now this may not necessarily mean that the buyer is paying way under market value. It usually means the valuation of the property came in too high. When the lender considers your short sale they order an evaluation of the value of property. The evaluation is simply someone’s opinion of value. This opinion may come from an appraiser, or more frequently it is a BPO – Broker’s Price Opinion. The BPO is a cheaper alternative to the appraisal and is nothing more than a real estate agent walking through the property and pulling some comps. Sometimes the only requirement to do BPO’s for banks is to hold a license in real estate, so the quality of the BPO varies widely. Hence -values may not always be accurate. An experienced CT short sale agent will know how to dispute this value with the lender and hopefully get your sale back on track.
- Missing documentation. The lender will require full financial disclosure to consider your short sale. This is the simplest problem to fix – provide a complete short sale package to begin with, and follow up to make sure documents were received. Lenders are very good at losing paperwork over and over. An experienced short sale realtor will know what the lender needs and will be diligent about follow up. They will also know how to handle documents that simply cannot be provided.
- Excessive cash/promissory note demands from the lender. Sometimes the lender will ask the seller to contribute cash or a promissory note at closing. These demands can be excessive upfront, but are frequently negotiable! For example, if your lender asks you to contribute $25,000 cash at closing, this is not always a take it or leave it scenario. A quality short sale agent will help you negotiate this down or away altogether. I have seen some outrageous requests from lenders, and I have see them disappear altogether.
- The walk away buyer. Not all buyers have it in them to wait, even despite your best efforts to qualify the buyer. Buyers get impatient or sometimes lose their financing, or walk away due to an inspection issue. Although losing a buyer and having to start all over is unfortunate and time consuming, it is not the end. As a CT short sale listing agent, I frequently sell the same properties 2 or 3 times before the sale sticks. This is not uncommon at all.
- Multiple lienholders that refuse to settle on common terms. In a perfect world everyone has a single mortgage, however this is often not the case with my short sale sellers. All the lienholders on title must reach a mutually satisfactory agreement for the sale to be successfull. The more lienholders you have, the less likely this is to happen. Once you add sewer and water liens, judgement liens, tax liens, etc, on top of a mortgage or two, a sale becomes near impossible. If you are falling behind with all your creditors and want to attempt a short sale, do so sooner than later, or you risk being forced into foreclosure simply by having too many lienholders. Act before your creditors do, and again – choose the right agent for your short sale. Multiple lienholders are not for rookies.
There are actually very few instances in which short sales are truly not possible. The key to having your short sale succeed is to take action early, hire the right help, and have the patience to stick through any upcoming bumps in the road.