Short Sale Lender Thresh | Cape Coral Real Estate

Top mistakes to avoid to get your short sales approved and closed.

Posted: under Realtor® Tools.
Tags: Cape coral short sales, short sale transaction, Short Sales

Yes, these are the top mistakes to avoid in order to have your short sales approved and eventually closed as I experience them with my fellow agents who work with me on short sales.

~ Not submitting multiple offers.
My experience tells me that providing multiple offers to the lender has indeed helped to show that the agent is doing all he/she can do to get the home sold. The multiple offers will make the difference. However, the servicing lenders generally do not like them. There is a second benefit to it: if the selected buyer walks, there is another purchase contract that can carry the deal to close.

~ Not submitting a proposal.
Many short sale agents just send a complete short sale package. It is true that you must have complete documentation, but it is important to draft a full proposal, as well. Organizing your request to approve a short sale has often made the difference between success and failure with the agents.
Also, many agents still think that the servicing lender is the one who approves the short sale and that they can actually negotiate with that lender’s “negotiator”. However, most loan notes are actually owned by the SMI and either they, or an MI insurance carrier if they have paid off a claim, approve or reject the short sale.

~ Not communicating adequately with parties.
Buyers are patient to a limit. Same with Communicating cooperating agents. You may think about weekly updates to all parties, more often when things happen. You can put a password protected area in your website where buyers and all parties can review the updates. Buyers must be part of the process and be motivated to hang in there when approval takes a long time.

~ Hardship.
Not meeting the definition of “hardship”. Like a criminal case wherein each element of the criminal statute must be proved, in short sale cases the hardship letter and financial documents must prove each element necessary for a secondary market investor to render a finding of “hardship”, and approve the short sale. The hardship letter must contain certain elements, without which, the case will be rejected. Make sure to get it right in the first place because a second attempt will ruined the authenticity of the transaction.

~ The lender’s net.
That’s what will make a short sale go through or not at the end of the day. The most important reason that a short sale is not approved is not meeting the net to lender, calculating the minimum threshold percentage of the fair market value. In the past, secondary market investors utilized the short sale versus REO comparison analysis to approve or reject a short sale. However, almost all SMIs have changed over to the minimum threshold analysis. That analysis ignores the amount of the debt and focuses on proof of the current fair market value of the property. For different SMIs and even different products, there is a set minimum threshold percentage of the fair market value that must be received in order for the proposal to be approved. Many agents erroneously believe they are still using the old comparison analysis.

So, the bottom line is this:
If a proposal meets the definition of hardship and that hardship is supported by the financial documents, you do nothing to cause the servicing lender to tank the proposal, and the offer meets the net to lender minimum threshold percentage of the fair market value, the short sale will be approved and if a qualified buyer remains, the transaction will close.