Mortgage Fraud and News

Reasons Short Sales Fail To Close

Reasons short sales fail to close

A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed. This is a pointer to the fact that a short sale does not get finalized as easily as the seller would want it to, as the lender normally does not agree to a discounted payoff so easily. The loss mitigation department of the bank, which primarily deals with short sales and is responsible for authorizing the sale, always tries to find out ways by which the losses can be reduced, and only in dire situations, does it allow a property to be short sold.

There are many reasons why a short sale can fail and the absence of a buyer is the most common amongst them. Most buyers look at short sales as a profitable deal, but also are concerned with the time frame that may be required to finalize the deal. The fact that a buyer is ready does not set the sale in motion. The bank also has to agree to the price being offered and hence failure to arrive at a mutually agreeable amount results in the deal not getting through. Hence, the offer price also becomes a prime reason for failure of a short sale. The seller filing for bankruptcy also happens to be a reason for a short sale to fail. Once a seller files for bankruptcy, all negotiations and deals involving the seller are put only hold till the bankruptcy is sorted out and a judgment passed on the same.

The fact that the buyer or the seller or one of the agents not being trained well enough to handle a short sale also becomes a reason for the sale to fail. Negotiations with the bank involve great deal of strategy and if the agents are not experts, they can easily be derailed by the loss mitigation expert of the bank. Miscommunication between the seller and the buyer or their agents can also fail the sale. This happens when the seller is not ready to co-operate with the showings of the property or the buyer is not willing to back down on his demands. Some demands which are often insisted by the buyers include taking care of closing costs of the buyer by the bank or the seller, which if not diplomatically handled, can blow the deal. Sometimes, the sellers opt out of the deal as they decide to pursue other options regarding financing of the house or even expect the buyer to let him stay on in the house, which are not normally accepted by the buyer. This then becomes a reason for the sale to fail.

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