Short Sales In Decline


Over the last six months short sales have become much more difficult to close. I have been doing short sales for years and have never seen so many fall through over such a short period of time. While they have always been difficult, this has gone to a new level. There are many reasons why short sales are getting harder and harder to process:

  1. Second Mortgages Have Become Much More Difficult to Negotiate With

    Many seem to want more money than the first mortgage will give them. In most short sales the first mortgage will give the second mortgage a nominal amount of $3,000 (under HAFA this has now gone up to $8,500) or slightly more based on a percentage of what is owed. We recently had a transaction fall through because the first mortgage was only going to give the second $6,000 and they wanted $9,000. The homeowner did not have the $3,000 to pay and the first mortgage would not allow a contribution from any other party involved in the transaction. A second transaction fell through because the bank holding the second mortgage saw that the seller had a significant amount of money in the bank and requested $50,000 to agree to the short sale which the seller could not agree to.

  2. The Short Sale Approval Process

    Numerous buyers or borrowers are not getting approved or not having a commitment at short sale approval. The mortgage approval process for a buyer in a short sale can be a little tricky. Since the process can take so long many buyers try to wait to get a mortgage commitment until they see short sale approval. At that point in may be too late to get a commitment and a clear to close before the expiration of the short sale approval. Buyers must act as if this is a normal transaction and proceed with getting their commitment. Since this has happened to our office we have added language to the contract of sale that will penalize potential buyers who do not comply.

  3. Banks Not Approving The Price

    The price is not always being approved and buyers will not counter the banks. Since the housing market is doing better the banks have been hesitant to accept certain offers. The banks are looking for fair market value in a short sale. While a buyer may get a slight discount it is not like years ago where one could get a substantial reduction in the actual value of the home. Some brokers and/or sellers try to get a family member or friend to purchase the home and accept an offer that is not based on the value of the home. This is actually considered bank fraud. All short sales must be arm’s length transactions meaning they can’t be purchased by family member and that there can be no agreements outside the contract of sale among other restraints.

  4. Oil Tank Removal & Remidiation

    We have had numerous underground oil tank test failures recently. While this is nothing unusual the problem is that a short sale seller usually has no money or is unwilling to put more money into a home they are using. So you not only have the tank removal and replacement cost there is always potential soil contamination which can cost a substantial amount of money to remediate. We fortunately have been lucky with some of these because the buyers have been willing to cover the tank removal and replacement costs and sometimes the insurance company will cover the remediation work.

  5. Complete Short Sale Application

    The foreclosure process has come to an end for many homeowners and if the banks do not have a complete short sale package under review they will probably not stop an upcoming auction. While our office has been able to file Order to Show Cause’s to stop a sale the Judges are starting to look a lot less favorable on this and will not always grant it. It is best to have an complete short sale application into the bank at least 30 days prior to a scheduled auction and in that case most backs will actually postpone the auction date.

How To Perform a Succesful Short Sale

If you are going to sell a home through a short sale you really need to understand the process and have a good team in place. This starts with an experienced, knowledgeable realtor or broker. All realtors will tell you they have experience with short sale which is not true. You need someone who has closed numerous short sale transactions in the last year. Additionally, you need an attorney who is totally experienced with the short sale process on both ends of the transactions.


Contact Peter Spino at ☎ 914-984-5315 for Short Sale assistance in Westchester and a free Short Sale consultation



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