Cape Coral Florida's Real Estate Guide

Every mortgage lender demands tons of documentation before approving a short sale. Despite what you may believe, you do not need to be in foreclosure or behind on your mortgage payments in order for a short sale to take place. Here are five of the most common reasons why lenders deny short sale requests:

The Seller (You) Does Not Qualify

If the you are asking for debt forgiveness, the bank will want to see a hardship letter from you explaning why you cannot afford to pay back the shortfall difference. If you have tapable assets, you are at a disadvantage if you are unwilling to work out a repayment plan with the bank. Get past this by providing documentation that shows that you have little or no assets and no disposable income.

The Buyer Does Not Qualify

A desire to buy a home and the financial means to afford a mortgage payment does not mean a buyer qualifies to buy a home. A buyer's lender will examine credit history, length of time on the job, debt ratios, and a host of other criteria to determine a borrower's qualifications. To gain credibility with the your bank, buyers need to submit a loan prequalification letter along with the offer, but a loan preapproval letter carries more weight.

Short Sale Offer Price is Too Low

Lenders will request one or more appraisals and possibly a BPO prior to accepting a short sale offer. When submitting a short sale offer to a lender, a comparative market analysis that justifies the price should be included. If the lender thinks it can make more money by moving forward with foreclosure proceedings, they will reject the offer.

The Short Sale Package is Incomplete

Don't count on your lender receiving everything you send over. Ask any short sale specialist and you'll hear how horrible banks are about losing documentation. Unfortunately, if even one important document fails to end up in your file, your sale could end up postponed or worse, denied. Be smart and make sure that you get a checklist from your lender of required documents, make copies of the required documents prior to mailing them, and always send complete packages.

Your Lender Sold Your Home Loan

Sometimes, a lender won't realize it no longer holds the mortgage on the property until many months have passed by during short sale negotiations. If it has sold the mortgage to another lender, it has no authority to approve a short sale because it has released the asset. Although you may continue to receive statements from your lender, your lender might be servicing the loan but not own it.