1) Another reason is morgage insurance.
2) 90%+ defies credibility. With 30% fail to close rate overall it means you are not taking business that will not close which is my point...
I don't think anybody has compiled any statistics (except perhaps the banks) with regard to the success rate across the whole industry. As stated by so many of the agents who have already answered the question here, the success depends so much upon the seller's hardship, the bank involved, if there is mortgage insurance, type of loan and last but probably most importantly, how well the sellers agent put the package together and presented it to the bank.
If you were a seller you could increase your chances significantly by interviewing and choosing an agent who is experienced in short sales and has a proven written track record. Sadly, as a buyer, you will have almost zero control. If the sellers agent has not or cannot do the job correctly or if the seller does not have a valid hardship you are essentially hoping and praying that the bank is loose about their guidelines. Good Luck!
This is an interesting question...More recently we have seen a noticable increase in completed short sale activity but to assign a number would be purely guess work. With this said our guesstimate for the percentage of short sales that do not reach completion would be in the 50-65% range.
The obvious major reason is the lender's lack of responsible involvement, including taking months to acknowledge a purchase offer. We are currently working with one short sale in which we have had three cash offers and the buyers waited in total over 1 1/2 years. During this period 2 of the three offers were were not responded to at all and the contracts lapsed.
With these transactions buyers are often stressed for a number of reasons but the general lack of compasion, appreciation, and understanding for the buyer leaves a very bad taste and often caused buyers to explore other purchase options.
On the positive side, we see that some lenders are acting more responsibly but on the whole, there is still room for growth.
What was most interesting was that I discovered of the 17 that were never approved, 12 of them occurred in 2010 and only 5 turn downs occurred in 2011. I attribute this to a number of factors. First, the banks are indeed getting more liberal and cooperative. Second, I have gotten better at processing short sales. And lastly, fewer short sellers came to us in the 11th hours asking if we could save them from foreclosure by doing a short sale instead. Most sellers are aware that a short sale is a good option and that the banks are approving more of them.
And of course, the same other answers still apply. A short sale has a better chance when you have a seller with good documentation, a listing agent who knows how to do them and if you are dealing with a large national bank. Small regional banks and credit unions seem less likely to approve short sales.
California has some recent laws that make short sales much easier then ever before so these comments might not apply nationwide.
Short Sales are a different animal that's for sure.
I'll answer the "Why" part first -
Recently there was a panel of the largest lenders in America and they were posed the question "Why do Short Sales fail?" Their top answer was "We did not receive all of the proper paper work." This is why it's important to have your agent find out what is required first and secondly get everything from the seller BEFORE putting the home on the market. A complete package submitted all at once helps a TON!
Second "What Percentage fall through" -
The most recent statistic I have heard is that 50% of all California Short Sales close. Our office is about 75% and my team have successfully closed almost every deal (with the exception of an extreme vandalism) . We even had one recently that was foreclosed on and we were able to rescind the foreclosure and close the short sale (crossed my fingers a lot on that one!!)
Check out our video library about short sales in the link below -
Why do short sales not close?
1- An agent that doesn't really know what they are doing.
2- The homeowner does something to hinder the short sale. Filing for bankruptcy, changing their mind and doing a loan modification, not allowing showings, not providing paperwork in a timely manner...
3- The bank sets the value to high and not enough time to work with the bank before an auction.
Do you research and hire an agent that knows how to handle short sales and follow your agents advice.
If you like, please feel free to call or email me with any questions.
The banks are getting more proficient at handling these types of transactions so they are not the 'big elephant in the room' any longer. I encourage my clients to put offers on them if there are a couple conditions present that help to guarantee a good result. I would encourage you to find a realtor and get out there with the help of your realtor consultant.