Nov
08

Reasons Short Sales Fail to Close

By
Ravisankar Poduval asked:

Short sales have always been deemed to be a very cumbersome and heart breaking process for the borrower, as there are no sure shot decisions taken as far as short sales are concerned. The lender is always trying out various methods by which he can avert a short sale whereas the borrower is always trying to close it as soon as possible, so that he can finish of the loan and start his life afresh. It is basically a tug of war between both parties and he who out thinks the other wins ultimately.

While every borrower would want the short sale to close as soon as possible, there are certain reasons why this does not happen. One of the most important reasons is the price itself. The loss mitigation department of the bank is constantly trying to figure out the right price which can reduce their losses to the greatest extent. This might not always be possible, as most buyers who are willing to buy a short sale property are always looking at profits and may not be ready to pay what the lender wants. This immediately kills the deal and puts more pressure on the borrower. Another prime reason for a short sale to fail is the inexperience of the seller or the agent representing the seller. Short sales are not easy to accomplish and hence you need to try hard to find the right agent who can pull off the deal. Most agents who call themselves experts in short sales are not really so, hence a good loss mitigation expert can derail him easily.

Another reason is the basic fact that you are unable to find a buyer to buy the property. As far as short sales are concerned, many buyers shy away from getting involved in such deals even though the profits are considerable, as they feel that the bank shall not accede to their requests and that they shall end up wasting a considerable amount of time trying to work the deal. This puts off many buyers and the absence of a buyer is the most common deal killer. The broker price opinion is another factor that discourages the buyer from buying the property, because he feels that the property is not worth the time and money that he shall be spending for it. Unexpected filing by the seller for bankruptcy can also be a reason for the sale to fail, as no deals shall be materialized as long as the bankruptcy proceedings are on. Most buyers try to take advantage of a short sale by insisting that the bank or the seller take care of his closing costs. This ultimately becomes a reason for the sale to fail, as banks certainly do not accede to this request. If the seller is also unable to take care of this due to his financial constraints, the buyer certainly shall not be interested in pursuing this deal.

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