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Why do so many short sales fail?

There are two, basic reasons why many preforeclosure short sales fail to close.

The reasons:

All parties do not fully understand the mortgagee(s)' requirements for both the construct of the sale, and/or how to interpret and comply to the mortgagee(s)' written terms and conditions for approval; and
The proffered, preliminary HUD1 fails to identify ALL liens and potential disbursements from proceeds of sale.

Each lender may have its own set of criteria for short sale consideration...IF it is authorized to entertain a short. Some lenders cannot offer a preforeclosure short sale workout option, so it is essential to quickly learn the individual mortgagee(s)' criteria for short sale approval.

It is also critical to accurately project all amounts to be paid from proceeds of sale. Failure to anticipate and identify all prospective and foreseeable disbursements from proceeds may result in irreversible problems at closing.

The key to successful shorts is to carefully prequalify the ss candidate for feasibility, and then carefully prepare all potential buyers with respect to the restrictions inherent in all preforeclosure short sale transactions.

An Ethical Approach (to successful short sales)

Posted by David Petrovich on 05/11/2007 07:58 AM

Comments (9)

preforeclosure short sales, workout criteria

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9 Comments on Why do so many short sales fail?

MAY

2007

DP,

Many times the LM depts. don`t know from one day to another what to do.

For example we`ve been busy dealing with a person, who was ready to allow us to SS,but were told that we haven`t complied with all the paper work by another person who just recently got involved.

When I explained that L/M person #1 told me that all of our paper work was done properly, we were blown off by L/M #2..

It`s very hard to believe somedays...

david,

how do you recommend getting information regarding short sales in your preferred geographical area?

Im working on one right now, i have the buyer, and a headache!

Scott: As I'm sure you know, most preliminary contact is to the mortgage loan servicer... NOT necessarily a decision maker. The LM clerk's responsibility includes prelim qualification and gathering information to be provided to the next level. Sometimes, even after a complete and comprehensive proposal is presented to the empowered body... the loan is sold and you must start, again, from scratch, with a new servicer.

Abe: The coffee hasn't kicked in yet and I don't understand what you are asking.

An Ethical Approach (to successful short sales)

I had one last year that almost didn't close because the seller didn't know they needed to bring back tax money to the table - money they didn't have. The seller's realtor ended up paying their taxes for them so the deal could close. Otherwise, I'd still be looking with my buyer. Sherry

Sherry: The listing broker should order a present owner judgment search, or even a simple credit report which can indicate avoidable obstacles. The successful short sailor must navigate a sea of (foreseeable)problems.

JUN

2007

My own home was going throught one in Fall of 2005. My first lender said yes to the short sale and my 2nd lender Countrywide refused......they drug it out all the way until 3 days before sale date of a foreclosure. Countrywide lost money on the deal. Is there any recorse..... my first lender got paid...... I have read other stories about class action lawsuits against Countrywide for this exact same action.

JUN

2007

Isn't it easier tohavae an Attorney lend a hand when it comes to short sales?

JUN

2007

I jokingly refer to some lawyers as bankruptcy salesmen... likening them to used car salesmen.... in that if you walk onto a used car lot, chances are good you'll buy a used car because that's what is sold on used car lots. Chances are, when you walk into an attorney's office with a financial problem, you'll walk out having purchased bankruptcy services... because that's what many lawyers have to sell.

While lawyers, in general, hold no extraordinary advantage, training, or skillset to construct a preforeclosure short sale... there is no reason why a seller shouldn't engage an attorney to review the transaction's documents, and coordinate the closing. Frankly, in my experience (25+ years in loss mitigation/short sales) most lawyers consider the work beneath them and their egos get in the way of a smooth transaction... creating an adversarial atmosphere with the lender when cooperation is most needed.

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