36 Reasons Why a Mortgage Lender May Deny a Short Sale on a Kansas City Home
Abel Fergoso Jr., a Wells Fargo short sale Vice President, gave an of interesting statistic at a recent short sale and foreclosure seminar in Kansas City. First, 35% of the distressed homeowners in the past year, have never contacted their mortgage servicer.
It may seem simple. If you're a distressed homeowner in Kansas City, contact your lender and see what options they may have available. See if you qualify for HAFA, a loan modification or maybe even a loan forbearance. If you have suffered a significant financial hardship, a monthly shortfall due to an increase in debt or a decrease of income or you have become financially insolvent, you may qualify for a short sale.
It may seem simple. If you're a distressed homeowner in Kansas City, contact your lender and see what options they may have available. See if you qualify for HAFA, a loan modification or maybe even a loan forbearance. If you have suffered a significant financial hardship, a monthly shortfall due to an increase in debt or a decrease of income or you have become financially insolvent, you may qualify for a short sale.
The unfortunate part of the short sale process is there is no blue print or process that has been accepted by mortgage lenders. Why? Because all short sales are different and involve a different group of negotiators.
A FHA short sale is the easiest short sale to negotiate because you can get the short sale price approved before an offer is submitted.
Next a portfolio loan is second easiest to negotiate followed by a portfolio loan with a Jr. lien. With a portfolio loan, a mortgage lender can use its internal negotiators.
An investor loan whether they have a Jr. lien or PMI are the hardest short sales to negotiate, because there will be multiple negotiators involved.
If you qualify for a short sale, you should list your home with an experienced Loss Mitigation Short Sale Specialist. An experienced short sale specialist will know how to successfully beat the odds of successfully negotiating your short sale. According to a fact released from a mortgage lender negotiator, nearly 68% of short sales are denied. Most all are denied by simple reasons. By knowing what type of short sale you have and having completed a error free short sale application, the probability of getting approved is highly likely.
If you qualify for a short sale, you should list your home with an experienced Loss Mitigation Short Sale Specialist. An experienced short sale specialist will know how to successfully beat the odds of successfully negotiating your short sale. According to a fact released from a mortgage lender negotiator, nearly 68% of short sales are denied. Most all are denied by simple reasons. By knowing what type of short sale you have and having completed a error free short sale application, the probability of getting approved is highly likely.
I have created a list of 36 Deadly Reasons Why Your Short Sale Application Maybe Denied. To make sure your short sale is not deny, I would make sure I did not commit these 35 Deadly Reasons.
36 Deadly Reasons Why a Short Sale Application may be Denied by Your Mortgage Lender:
1) Incomplete Paperwork - The paperwork submitted to the mortgage lender to request a short sale was incomplete. In addition, the mortgage lender may send request for additional paperwork. This paperwork needs to be completed in its entirety before it is sent to the mortgage lender. Mortgage lenders may deny a request for a short sale if the paperwork is incomplete.
2) Unsupported Financials - The financials submitted to the mortgage lender are to demonstrate that the Kansas City homeowner has a financial hardship, a monthly shortfall and that they’re insolvent. If the financials don’t show this, the mortgage lender may deny the short sale request.
3) Optimistic Home Value - The mortgage lender hires an appraiser to determine the home value. If the appraiser submits an appraisal that is to high, the mortgage lender may counter the offer submitted or deny the request for a short sale.
4) Deferred Maintenance - If the Kansas City homeowner has been having problems paying the mortgage, they may have also neglected repair issues around the home. If the repair issues are costly, the mortgage lender may decide to deny the request for a short sale. They may decide to foreclose the Kansas City home and make the necessary repairs then sell the Kansas City home as a REO property.
5) Deny the Appraiser - The mortgage lender will send an appraiser to the Kansas City home to help determine the value. If the Kansas City homeowner denies the appraiser from entering the home, the mortgage lender may deny the request for a short sale.
6) Not Enough Time - The mortgage lender may deny the request for a short sale if there is not sufficient time allowed to process the short sale in the real estate contract or the foreclosure date has been set.
7) Sales Contract Not Complete - The mortgage lender will review the sales contract. If the sales contract is not completed correctly with the proper addendums, the mortgage lender may deny the request for a short sale. In addition, the mortgage lender may deny the short sale application if the sales contract has scribble marks on it.
8) Incomplete HUD/Settlement Statement - When the real estate contract is submitted, the mortgage lender will want to review a HUD/Settlement statement. If the HUD settlement statement is missing or incomplete, the mortgage lender may deny the request for a short sale.
9) Not an Arms Length Transaction - If the offer submitted is from a family member or friend, the mortgage lender may deny the request for a short sale. The mortgage lender wants a sales contract from a non-relative. They also don’t want to review a sales contract that has the homeowner planning on renting the home.
10) Not Completing Paperwork in a Timely Matter - The paperwork needs to be completed in a timely matter. If the homeowner does not submit the paperwork in a timely matter, the mortgage lender may deny the request for a short sale.
11) Timing - The mortgage lender may deny the request for a short sale if the foreclosure date has already been scheduled.
12) Homeowner Filed Bankruptcy - If the Kansas City homeowner filed bankruptcy, the mortgage lender may deny the request for a short sale.
13) Low Ball Offer - The mortgage lender may deny the request for a short sale if the initial review of the sales contract reveals that the sales price is to low.
14) Inspections - The mortgage lender may deny the request for a short sale if the inspections have not been completed within 15 days of the acceptance of the sales contract. Most buyers want to wait until the offer has been accepted by the mortgage lender. Mortgage lenders want ALL contingencies completed. In addition, the negotiator assigned by the mortgage lender maybe thinking that if the buyer is concerned about $400-$500, then they may not be the most qualified buyer for the Kansas City home. In addition, the short sale will probably get denied if the buyer request for the seller to complete repairs. The mortgage lender wants to see an “As-Is” real estate contract. If the buyer decides to do repairs, it is for the buyer's informational purposes only.
15) Cancellation - The mortgage lender may deny the request for a short sale if the buyer has canceled the sales contract prior to the mortgage lenders approval.
16) Unrealistic Closing Date - The mortgage lender may deny the request for a short sale if the closing date is to quick. For a pre-approved short sale, the mortgage lender is looking 30-45 days to close. For a short sale that has not been pre-approved, the mortgage lender is looking for closing dates to be 60-90 days.
17) Deny Banks Acceptance - Once the mortgage lender makes an offer, they will expect the Kansas City homeowner to accept the terms. If the terms are not accepted in a timely matter, the mortgage lender will deny the short sale.
18) Additional Liens - The mortgage lender may deny the short sale if there are additional liens. The additional liens may affect the ability to close the sales contract.
19) Uncooperative 2nd Mortgage - The 2nd mortgage lender typically gets pennies on the dollar to nothing. Because of this they may become uncooperative. If the 2nd mortgage becomes uncooperative, the mortgage lender may deny the short sale.
20) AS-IS - The mortgage lender and Kansas City homeowner will not be paying for repairs. The mortgage lender may deny the short sale if there is a request for repairs.
21) Complicated Contract - The mortgage lender may deny the short sale if the sales contract is complicated with additional addendums and amendments. Mortgage lenders like to see clean simple contracts.
22) Fraudulent Request - The mortgage lender may deny the short sale if they believe the financials submitted or additional paperwork has been fraudulently submitted.
23) Not a Strong Buyer - The mortgage lender may deny the short sale if they believe the buyer is not qualified or a strong enough buyer to purchase the home. The mortgage lender will not start working on the file if the buyer does not appear strong enough to buy the home.
24) Inaccurate Appraisal or Broker Price Opinion (BPO) - The mortgage lender may deny the short sale if the appraisal and/or BPO ordered by the mortgage lender does not support the value on the real estate contract. Typically this means that the analysis is much higher than the sales price.
25) Insufficient Hardship - The mortgage lender may deny the short sale if the homeowner has not shown a valid hardship. This is particulary true with investor owned properties and homeowners who are trying to sell a second home.
26) Incompetent or No Short Sale Agent - The mortgage lender may deny the short sale if there is no short sale agent or the short sale agent has demonstrated an inability to handle the short sale for the homeowner. Many short sales are initiated and negotiated on Equator. Many real estate agents do not understand or have had experience working on the Equator system.
27) Short Sale Addendum Missing - The mortgage lender may deny the short sale if a short sale addendum that clearly states that the real estate offer is contingent upon the mortgage lenders is missing from the real estate contract.
28) Unqualified Homeowner - The mortgage lender may deny the short sale if the lender does not think the seller is qualified for the short sale. Reasons for being unqualified are not behind on mortgage payments or haven’t shown an “imminent danger of foreclosure”. In addition, if the homeowner has applied for a loan modification and hasn't been denied, the mortgage lender may deny the short sale.
29) Unlawful Request - The mortgage lender may deny the short sale if they make a demand that breaks state law. Banks are governed by Federal law and believe they are not subject to state law. Many times they will make demands that are against state law. Most of these demands are directed toward title interest of the property.
30) Information Does Not Match - The mortgage lender may deny the short sale if the information on the request does not match the information on their files. The address and mortgage holders name(s) need to match exactly what is on file with the mortgage lender.
31) Bad Behavior - The mortgage lender may deny the short sale if the short sale specialist who is working on behalf of the mortgage holder exhibits bad behavior. Although it is understandable why a short sale specialist may get upset on the phone when they’re asked to send a document for the tenth time or receiving no follow-up for 6 months, the short sale specialist must stay calm on the phone with the mortgage lender.
1) Incomplete Paperwork - The paperwork submitted to the mortgage lender to request a short sale was incomplete. In addition, the mortgage lender may send request for additional paperwork. This paperwork needs to be completed in its entirety before it is sent to the mortgage lender. Mortgage lenders may deny a request for a short sale if the paperwork is incomplete.
2) Unsupported Financials - The financials submitted to the mortgage lender are to demonstrate that the Kansas City homeowner has a financial hardship, a monthly shortfall and that they’re insolvent. If the financials don’t show this, the mortgage lender may deny the short sale request.
3) Optimistic Home Value - The mortgage lender hires an appraiser to determine the home value. If the appraiser submits an appraisal that is to high, the mortgage lender may counter the offer submitted or deny the request for a short sale.
4) Deferred Maintenance - If the Kansas City homeowner has been having problems paying the mortgage, they may have also neglected repair issues around the home. If the repair issues are costly, the mortgage lender may decide to deny the request for a short sale. They may decide to foreclose the Kansas City home and make the necessary repairs then sell the Kansas City home as a REO property.
5) Deny the Appraiser - The mortgage lender will send an appraiser to the Kansas City home to help determine the value. If the Kansas City homeowner denies the appraiser from entering the home, the mortgage lender may deny the request for a short sale.
6) Not Enough Time - The mortgage lender may deny the request for a short sale if there is not sufficient time allowed to process the short sale in the real estate contract or the foreclosure date has been set.
7) Sales Contract Not Complete - The mortgage lender will review the sales contract. If the sales contract is not completed correctly with the proper addendums, the mortgage lender may deny the request for a short sale. In addition, the mortgage lender may deny the short sale application if the sales contract has scribble marks on it.
8) Incomplete HUD/Settlement Statement - When the real estate contract is submitted, the mortgage lender will want to review a HUD/Settlement statement. If the HUD settlement statement is missing or incomplete, the mortgage lender may deny the request for a short sale.
9) Not an Arms Length Transaction - If the offer submitted is from a family member or friend, the mortgage lender may deny the request for a short sale. The mortgage lender wants a sales contract from a non-relative. They also don’t want to review a sales contract that has the homeowner planning on renting the home.
10) Not Completing Paperwork in a Timely Matter - The paperwork needs to be completed in a timely matter. If the homeowner does not submit the paperwork in a timely matter, the mortgage lender may deny the request for a short sale.
11) Timing - The mortgage lender may deny the request for a short sale if the foreclosure date has already been scheduled.
12) Homeowner Filed Bankruptcy - If the Kansas City homeowner filed bankruptcy, the mortgage lender may deny the request for a short sale.
13) Low Ball Offer - The mortgage lender may deny the request for a short sale if the initial review of the sales contract reveals that the sales price is to low.
14) Inspections - The mortgage lender may deny the request for a short sale if the inspections have not been completed within 15 days of the acceptance of the sales contract. Most buyers want to wait until the offer has been accepted by the mortgage lender. Mortgage lenders want ALL contingencies completed. In addition, the negotiator assigned by the mortgage lender maybe thinking that if the buyer is concerned about $400-$500, then they may not be the most qualified buyer for the Kansas City home. In addition, the short sale will probably get denied if the buyer request for the seller to complete repairs. The mortgage lender wants to see an “As-Is” real estate contract. If the buyer decides to do repairs, it is for the buyer's informational purposes only.
15) Cancellation - The mortgage lender may deny the request for a short sale if the buyer has canceled the sales contract prior to the mortgage lenders approval.
16) Unrealistic Closing Date - The mortgage lender may deny the request for a short sale if the closing date is to quick. For a pre-approved short sale, the mortgage lender is looking 30-45 days to close. For a short sale that has not been pre-approved, the mortgage lender is looking for closing dates to be 60-90 days.
17) Deny Banks Acceptance - Once the mortgage lender makes an offer, they will expect the Kansas City homeowner to accept the terms. If the terms are not accepted in a timely matter, the mortgage lender will deny the short sale.
18) Additional Liens - The mortgage lender may deny the short sale if there are additional liens. The additional liens may affect the ability to close the sales contract.
19) Uncooperative 2nd Mortgage - The 2nd mortgage lender typically gets pennies on the dollar to nothing. Because of this they may become uncooperative. If the 2nd mortgage becomes uncooperative, the mortgage lender may deny the short sale.
20) AS-IS - The mortgage lender and Kansas City homeowner will not be paying for repairs. The mortgage lender may deny the short sale if there is a request for repairs.
21) Complicated Contract - The mortgage lender may deny the short sale if the sales contract is complicated with additional addendums and amendments. Mortgage lenders like to see clean simple contracts.
22) Fraudulent Request - The mortgage lender may deny the short sale if they believe the financials submitted or additional paperwork has been fraudulently submitted.
23) Not a Strong Buyer - The mortgage lender may deny the short sale if they believe the buyer is not qualified or a strong enough buyer to purchase the home. The mortgage lender will not start working on the file if the buyer does not appear strong enough to buy the home.
24) Inaccurate Appraisal or Broker Price Opinion (BPO) - The mortgage lender may deny the short sale if the appraisal and/or BPO ordered by the mortgage lender does not support the value on the real estate contract. Typically this means that the analysis is much higher than the sales price.
25) Insufficient Hardship - The mortgage lender may deny the short sale if the homeowner has not shown a valid hardship. This is particulary true with investor owned properties and homeowners who are trying to sell a second home.
26) Incompetent or No Short Sale Agent - The mortgage lender may deny the short sale if there is no short sale agent or the short sale agent has demonstrated an inability to handle the short sale for the homeowner. Many short sales are initiated and negotiated on Equator. Many real estate agents do not understand or have had experience working on the Equator system.
27) Short Sale Addendum Missing - The mortgage lender may deny the short sale if a short sale addendum that clearly states that the real estate offer is contingent upon the mortgage lenders is missing from the real estate contract.
28) Unqualified Homeowner - The mortgage lender may deny the short sale if the lender does not think the seller is qualified for the short sale. Reasons for being unqualified are not behind on mortgage payments or haven’t shown an “imminent danger of foreclosure”. In addition, if the homeowner has applied for a loan modification and hasn't been denied, the mortgage lender may deny the short sale.
29) Unlawful Request - The mortgage lender may deny the short sale if they make a demand that breaks state law. Banks are governed by Federal law and believe they are not subject to state law. Many times they will make demands that are against state law. Most of these demands are directed toward title interest of the property.
30) Information Does Not Match - The mortgage lender may deny the short sale if the information on the request does not match the information on their files. The address and mortgage holders name(s) need to match exactly what is on file with the mortgage lender.
31) Bad Behavior - The mortgage lender may deny the short sale if the short sale specialist who is working on behalf of the mortgage holder exhibits bad behavior. Although it is understandable why a short sale specialist may get upset on the phone when they’re asked to send a document for the tenth time or receiving no follow-up for 6 months, the short sale specialist must stay calm on the phone with the mortgage lender.
32) Homeowner has High Credit Scores and/or Assets – If the homeowner has high credit scores or has assets, the mortgage lender may deny the short sale.
33) Multiple Offers – If the buyer has multiple offers on short sales and can't prove their ability to complete the transactions on all sales, the mortgage lender may deny the short sale. Mortgage lenders are now requesting earnest deposit to be deposited within a reasonable time-line upon acceptance of the real estate contract.
34) Unreasonable Closing Cost in Sale – If there are closing cost in the sales contract that involves the seller or the mortgage lender to be paying some or all of the buyer's closing cost, the mortgage lender may deny the short sale. In addition, the mortgage lender does not want to have unreasonable cost on the HUD statement.
35) Strategic Defaulter – The mortgage lender may deny the short sale if they believe the homeowner is a strategic defaulter. A strategic defaulter is a homeowner who is not in default and has the ability to pay their mortgage. The reason why the homeowner is requesting a short sale is the value of their home is lower than what is owed. If you have been denied a short sale and you think the mortgage lender is wrong or maybe in error, request a review of your short sale or issue an appeal. During this process, the mortgage lender will issue the reason why the short sale was denied. If the issue is a correctable issue, correct the issue and finish up the short sale. In some cases, the short sale will need to be restarted with a new buyer.
36) Unauthorized Contact – If an unauthorized contact contacts the mortgage lender regarding the short sale, the mortgage lender may deny the short sale. In addition, if an unauthorized contact pretends that they're an authorized user, the mortgage lender may send the file to the legal department. The legal department will determine if there has been a law broken. If they have determined that there is a law broken, not only will the mortgage lender most likely deny the short sale, they may also request charges on the offending party.
Best of luck in your short sale endeavor. If you need any help in negotiating a short sale, feel free to contact the Dowell Taggart Team. About the Author: Chris Dowell is a 22 year real estate veteran. Having been a 3rd generation REALTOR, Chris did not know what a short sale was the first 14 years of real estate. In 2005, Chris had a listing that the bank thought was worth 1.6 million dollars. After doing an analysis on the property, Chris determined that the property was worth half that value. Since the homeowner didn’t have the money to payoff the mortgage, Chris assisted the homeowner in negotiating a short sale. Since that first short sale, Chris has assisted in many short sales in Kansas City. Chris is a partner of the Dowell Taggart Team of RE/MAX Premier Realty and a member of the Kansas City Real Estate Network. Have a short sale related question, lets talk. I can be reached at 913.712.9313 or by email at chris.dowell@remax.net. If you need help with a short sale, hire a professional. The Kansas City Real Estate Network helps struggling homeowners avoid foreclosure by assisting them with short sales. The Kansas City Real Estate Network has negotiated short sales in Gardner, Olathe, Overland Park, Leawood, Lenexa, Shawnee, Mission, Merriam, Prairie Village, Basehor, Tonganoxie, Lansing, Gladstone, Liberty, Lee’s Summit, Independence, Belton, Raymore, Pleasant Hill, Grandview and Kansas City.
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Blog post written by the Dowell Taggart Team of RE/MAX Premier Realty
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