Short Sale Acceptance
By JD Esajian on September 18, 2013
Finding a property in which the seller is willing to let go for a loss can be great, but unless you have lender approval, you don’t have a deal. There are many reasons why a lender wouldn’t agree to a short sale deal, but the most common reason usually regards the seller’s hardship. The seller has to prove that they are currently facing a financial hardship. In most cases, if the seller is late on their mortgage and either in or facing foreclosure, they will accept. If the seller is current, however, you could run into an issue down the road.
Once the rush of foreclosures and short sales started, sellers became wise to the fact that if there are no long term financial repercussions, a short sale was not a terrible option. They may have been able to live in their homes during the process (mortgage free) and the damage sustained to their credit was not as severe as a bankruptcy. This opened the door for many “strategic defaults.” A seller would take a short sale just to get rid of the financial burden. Lenders quickly became hip to this and tightened up their guidelines for what would be an acceptable sale.
If you are working with a seller on a short sale, the first thing you need to ask is if the property has been accepted by the lender. In an effort to speed up the process, most lenders go through a third party online source to accept documents and issue approvals. This process has expedited an approval system that was once six months or longer. If your seller does not qualify in the lenders eyes, there is nothing you can do. There must be a legitimate hardship, among loads of additional paperwork, which must be provided to the lender. Without this, and the approval, you don’t have a deal.
Short sales can still be a great opportunity to acquire property, but you need to make sure that your seller is approved. If not, you could spend many hours working on the deal and end up with nothing to show for it.