A Perfect Storm Short Sale Denied

With the exception of an FHA short sale, I can’t recall the last time this Sacramento short sale agent lost a short sale. Every short sale I do in Sacramento pretty much closes as long as the seller doesn’t give up. It is extremely unusual and rare for a bank to deny a short sale these days. I’ve been selling and negotiating short sales since 2006, so that’s about 8 years, and back when short sales started, maybe half were accepted. Not so today.

Today, it’s about 100% that close, and I’ve closed hundreds of short sales. Because banks generally prefer a short sale vs foreclosure. Properties are most likely in better condition, which helps them sell for more money; and there is a pool of buyers who believe a short sale is a good deal even when it’s not.

To close a short sale, the transaction needs to be a round peg that fits into a round hole. Follow the rules and the short sale is approved.

To over simplify, the basic rules are this:

1. Seller must qualify
2. Sales price is market value

Sellers often ask me how I know their short sale will be approved, and it’s based on those two factors. But sometimes the investor guidelines stipulate that the bank cannot do a short sale. PSA agreements can make it more profitable for the bank to foreclose. We don’t have access to the PSA agreements as mere real estate agents, so we won’t know for certain whether the PSA will kick out the short sale until a package has been submitted and reviewed.

We can get around that problem by submitting for a HAFA short sale. Most of the banks participate in the HAFA short sale program, as long as the investor is not a government entity. Government-sponsored entities have revamped their own program versions. But when a bank does not participate in HAFA in 2013, that is probably a red flag.

You would think the bank could disclose upfront. You know, read the guidelines and say nope, don’t bother submitting. That would be too intelligent and logical. Two words that don’t describe the American banking system. Instead, they put everybody through the song and dance before slamming hopes.