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Top 5 Reasons Banks Reject Short Sale Offers

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By : Melanie Butler    99 or more times read
When you are house shopping and searching the market, you might find a house with a price that just seems too good to be true. No, the price isn't listed incorrectly, but instead it is a short sale. This means the previous owner was not able to pay the mortgage owed and the bank took possession. It then becomes the bank's goal to simply regain the money it lost on the facility, and to do this it reduces the price of the house, generally far below what other homes are selling for in the area. Sure, this might equate to a significant amount of savings, should you decide to bid on the short sale, but it doesn't mean you are going to land the house.

When you place an offer on a house not owned by the bank, it typically takes a few days to receive a response from the current owners. However, with a bank, it generally takes weeks, if not months, to hear back. Discovering your short sale offer is rejected can be disheartening, as you waited for such a long time. To avoid having your offer refused, you need to know the top five reasons a bank does reject these offers.

Offer Price Too Low

This is typically the top reason why a bank rejects an offer. Low balling a bid on a currently owned house is always recommended, as much as you are able to reduce the overall price you pay for the house, but then again you are able to hear back about your offer after a few days. Trying to low ball the bank is not a great idea, as it takes weeks or longer to receive a rejection notice. You can go under the asking price, but don't go significantly lower, as you don't want to wait several weeks for nothing.

Bank Received a Higher Price

Outside of offering a price too low, this is the next top reason your offer is rejected. Because the house is rather attractive at its current listing price, there are generally going to be other interested parties. If you put in a bid, around the same time another individual places a slightly higher bid, the house is going to go to the individual with the most money to offer. It just makes sense for the bank to go with this option.

Bank Loses Documentation

It is important to go with a professional real estate agent to file the short sale documentation, but this doesn't prevent the bank from misplacing the documents. Should this occur, you need to refile, as the bank can't complete the offer.

Seller Fails to Qualify

Often times a seller goes through the bank in order to reclaim money or pay off their debt to the bank. However, if you have placed an offer on the house and then the seller is determined to not qualify for the short sale, you both are out of luck.

Banks Sells the Loan

Occasionally a bank does sell the loan that is owed to them on the house. This means, the bank no longer owns the house, and the offer you submit to them is essentially worthless, so you need to restart the process with the new owner.
Melanie Butler is a Freelance Real Estate writer for one of the Top Destin Real Estate Agencies.

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