A short sale occurs when a seller and lender agree to sell the home for less than what is owed on the property.  If there are multiple liens on the proeprty, all the lien holders must agree to the arrangement.  Although the banks could save money by doing the short sale, many times the foreclosure still happens.  Foreclosures are quite expensive to the bank to repossess and manage the sale of the property a year later.

As it makes sense for the bank(s) to sell the property at a discount, it doesn’t always happen.  Here are a few reasons on why short sales fail:

1. The bank must be provided with a complete short sale packet which may include: financial information, 2 years of income taxes, hardship letter, last two bank statements, listing agreement, last 2 pay stubs, preliminary settlement statement, and possibly more may be requested by the bank.
2. The buyer is not really committed to the purchase. The short sale process is quite long and can take 6-8 weeks to make a decision.  The long short sale process can be quite a long process and requires a buyer with plenty of endurance.
3. The bank loses the short sale packet – This happens quite often.  They can lose the file while transferring between departments, etc.  Make sure to keep copies and resend anything that becomes lost.
4. The BPO is way too high. BPO stands for Broker Price Opinion.  Before a bank will accept an offer, they will order a BPO to get an appraisal on the property to get a good reflection of the property value.  Often a real estate agent is hired to do the BPO, which can range in values depending on the agent.
5. You ran out of time. This bank can discover a possible problem with the property, such as an IRS lien, Property Tax Lien, or Home Owner Associate Lien.  The liens will change the lender’s bottom line and can possibly kill the deal.    Or you can run out of time when the first and second lien holder cannot come to an agreement on how to handle the loan(s).

There are quite a number of more reasons why a short sale may fail, and in many cases it can be do to your Realtor. Make sure to hire a real estate agent that knows what they are doing and will do the job. You don’t want them to fall into any of these categories: lack of ability and knowledge, lack of experience, laziness, short cut taker, lack of due diligence, lack of focus, lack of negotiation skills, or someone who has a lack of personal incentive. All of these can get you in a situation where you don’t get the house. Short sales take work, but many agents don’t want to do the work. Make sure to properly evaluate who represents you to nix this problem in the bud, early!