Less than 50% of all listed short sales in CT actually reach closing. With most of these homeowners in a must-sell situation – why do only 1 in 2 short sales close? Something obviously goes wrong in the process as lenders are generally looking to approve short sales rather than foreclose to reduce their own losses. Having closed hundreds of short sales in CT over the last 7 years with over a 90% success rate,and having taken over plenty of other realtors’ failed short sales only to bring them to close, I can tell you there are generally only a few reasons a short sale would not be approved and close:
5. INCOMPLETE DOCUMENTATION: Short sales involve a lot of paperwork and the lenders pick over every detail. If paperwork is not reviewed for completeness and accuracy and not followed up on consistently, the short sale submission can simply die in document delay, and it is unlikely the lender will reach out to tell you what is wrong or missing. Knowing what documents the lender will anticipate, reviewing every document for possible issues and following up with the lender regularly is key to keeping a short sale package moving.
4. INACCURATE APPRAISAL/BPO: Lenders will order a valuation of your property as part of the short sale process. If planned for well, these generally go as planned and support the purchase price of the home. Once in a while appraisers and BPO agents completely miss the mark, leading lenders to have an inaccurate idea of value – frequently leading to a short sale denial. When this happens, there are always options. Theparty in charge of negotiating the short sale can dispute this value – leading to a more accurate value, or sometimes the value just needs to be waited out to its expiration date.
3. LATE START: Foreclosure in CT is not fast. Lenders are not quick to start foreclosure proceedings, and the actual suit itself can take years. When faced with a possible default – you have plenty of time to take action and attempt a workout. However, much too frequently I get a call from a hopeful seller just weeks away from a foreclosure law date. The odds of a successful workout in such a limited time are just not very good. You have time – but take action early!
2. UNPREPARED BUYER: Unfortunately I see this happen about as often as I see short sales fail for many of the reasons above. The short sale gets approved, an approval letter is issued…and then the sale dies with the buyer. This is usually caused by the buyer’s agent not understanding the process to prepare their buyer properly, slow mortgage processing on the buyer’s end, and/or lack of timing inspections and other contingencies in line with the expected approval timelines. This can be avoided by preparing all the parties involved thoroughly and timing inspections and mortgage contingencies strategically.
1. INEXPERIENCED LISTING AGENT AND/OR ATTORNEY: This is #1 for good reason!!! The most common reason short sales fail is because someone involved simply didn’t know what they were doing. Without significant experience in closing short sales there is simply no way a Realtor or attorney could possibly anticipate or understand the nuances of all the different lenders, investors and short sale programs involved with the seller’s short sale. Here’s where you have the best chance of not only listing your home as short sale, but by having it actually close – do your homework and get the best representation possible! The difference could very well be a smooth sale and closing…or facing a foreclosure and a possible deficiency judgement.
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