Why the lenders reject short sales and prefer REO

Real Estate Agent

We all think lenders are crazy to turn down short sales. However, they think that REO is better. Here is why the rules are so tough to approve a short sale. The lenders and investors don't think they are losing money by rejecting short sales. Let me explain.

All that is ever brought to their attention is how they lost money by accepting a short sale. A flipper buys a house for 150k and resells it for 200k. "This guy made a 50k profit. That's money that should have gone into our pocket," they think to themselves.

This is why we need to document it whenever a former short sale sells for less as an REO. They don't see the $182,000 losses on a rejected short sale. Why not? Because it's never brought to their attention.

If anything bad happens, rather than make the process easier, they tighten up the rules even more. That is why the short sale marketplace is so tough.

Good buyers paying a fair price get turned away. More short sales turn into REOs. I'm convinced that more money is lost on short sales that turn into REOs than is lost to flippers. No, I'm not a flipper. Nor do I endorse them.

But, the whole flipping concept is made possible by the way the short sale process is ran. If the banks acted like a normal seller, the whole flipping problem would disappear. They should be looking for a good, qualified agent and have them try to get the best price possible for the home. Instead, good offers are turned down and bad offers accepted. It's insane!

Are you looking for a marketing system to list more short sales? We have developed a system to farm and convert the Pre-Foreclosure Leads and the Expired Short Sales. It enables us to list a consistent number of short sales each month. Now we are offering it to other agents. Get more info at: http://www.AgentLeadExplosion.com .

If you're running into problems with short sale files, then you probably need to look into the How to Escalate a File Course. Get more info at http://www.HowToEscalateAFile.com .

You can get a copy of all the fax numbers for congress and a fax template to send to them here: http://shortsaleagentadvocate.com .

Got questions about short sales? Just ask.

Ben Curry & Chris Curry - Keller Williams Real Estate, Gainesville Florida.


We specialize in short sales in Gainesville Florida. Gainesville Florida short sale, Gainesville fl short sale, Gainesville Florida short sales, Gainesville short sale


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Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Calabasas CA

There are many reasons a lender may reject a short sale offer.
These include:

  • The offer price is too low. Lenders will normally set the minimum net proceeds from a short sale of the property. 
  • The short sale package submitted by the seller is incomplete. 
  • The seller is not eligible for a short sale.
  • The buyer is not eligible (financing not in place)
  • The short sale is not an “arm’s length” transaction. The buyer must be unrelated and unaffiliated with the seller.
  • A short sale is not evaluated as the best financial option for the property.


Apr 12, 2014 10:18 AM #1
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Ben Curry

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