Home Buying in Concord>Question Details

Lisa Bias, Home Buyer in Concord, CA

What percent of short sales fall through and why?

Asked by Lisa Bias, Concord, CA Fri Feb 10, 2012

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Kevin McLaughlin’s answer
All good answers below - The listing agent's ability and experience are vital to success. Find out how many successful short sale closings they've had in the last few months to a year.

Good luck!
2 votes Thank Flag Link Sat Feb 11, 2012
Kevin,

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...
Web Reference: http://bob2sell.com
1 vote Thank Flag Link Thu Feb 16, 2012
Lisa,

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!
1 vote Thank Flag Link Sat Feb 11, 2012
It really depends on the area of the country in which you live. Florida & Nevada have closer rates above 50% because they do so many. The Realtors® & asset managers in these areas are very skilled at this type of transaction and most importantly they also know not to accept short sale listings with no hope of being approved. They understand the rules & guidelines of a short-sale and are very successful, in my area of the country we are terrible at the short sale process and less than 10% of listed short sales actually close. My advice is to find a Realtor® with extensive experience in this area of real estate.
1 vote Thank Flag Link Sat Feb 11, 2012
Scott,

What area are you in sir? My partner and I provide a service were we save the commissions for listing/buyer agents when their high end short sale gets denied. In addition, (depending on where your at) we could help the end buyer(s) finally take possession of the property they have been waiting months and months for by going to the trustee sale and purchasing the property.

Regards,
Lee Dean - rld@thecommissionsaver.com

With short sales falling through at greater than an 85% rate in your area.
Flag Sat Apr 2, 2016
Lisa,

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.
1 vote Thank Flag Link Sat Feb 11, 2012
The chances of the short sale being approved is very high as long as the seller has a valid hardship and the listing agent/negotiating party submits a complete package for the seller and follows through. Over the last few years the lenders have all become reasonable in my experience in approving short sales. Each lender has a unique process and each lender and often each agent for the lender has different timetable. So it is not so much if but when it will be approved. I do recommend a short sale as a viable option in your home search however make sure your agent is diligent in ensuring that the file is being stewarded through the process.
1 vote Thank Flag Link Sat Feb 11, 2012
We hired a third party to handle our short sale with a great track record. They have lawyers on staff to handle the negotiations. We were provided with a check list of documents needed to be provided including a hardship letter. Our listing agent had to do the same. The main objective in our case was for the agent to work closely with our third party short sale team. This also allowed our agent to focus on marketing and finding the qualified buyers with the patience to wait for the process to take place.
0 votes Thank Flag Link Mon Apr 29, 2013
http://www.shortsalepros1st.com/
Flag Mon Apr 29, 2013
I answered this questions previously and I got curious about it. So I looked at my own statistics for the last 2 years. Since the beginning of 2010 I took 64 short sale listings. We closed 43 of them and we had short sale approval on anther 4 in which the buyer ultimately failed to close the deal.

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.
0 votes Thank Flag Link Fri Apr 20, 2012
Hi Lisa,

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 -
0 votes Thank Flag Link Fri Apr 20, 2012
I think nationally only about 30% of all short sales close. And Bob, I do close on over 95% of my short sales and I usually run between 10-15 short sales. It all about setting the sellers expectations up front, all of my sellers know the potential outcomes that are possible and plan accordingly. I turn down very few short sales.

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.
0 votes Thank Flag Link Wed Feb 15, 2012
Lots... I am always curious (and dubious) about agents who say they close 80-90%. I take this to mean that they do not take the ones that won't close e.g. properties with MI or other insurances that force properties into foreclosure. The fact is that there is no way to tell. One can not tell whether an agent took a listing and never put it online or cancelled it once they figured out it was a dog. By that standard I am 100% as well Woo Hoo!
Web Reference: http://bob2sell.com
0 votes Thank Flag Link Wed Feb 15, 2012
It all depends on your agent. Make sure you are working with someone knowledgable on short sales. Remember you don't have much time if you are considering short sales because the tax break goes away at the end of the year. Hopefully, they might renew the bill but right now...there is no guarantee.

If you like, please feel free to call or email me with any questions.
0 votes Thank Flag Link Sat Feb 11, 2012
As other agents have stated, there are terrible general statistics available. I suggest that if you are planning to make an offer on a short sale, find out the success rate for the listing agent. I close 90% of my short sales. The only reason my fail is due to the bank. If the bank will not accept a reasonable value or makes a requirement that is against the law then the short sale will fail and the property will go into foreclosure.
0 votes Thank Flag Link Sat Feb 11, 2012
Hi Lisa,
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.
Regards,
Suzanne Looker
0 votes Thank Flag Link Sat Feb 11, 2012
It has been my experience that if the seller's agent is experienced in negotiating you will have no problem. Just be patient as it is a longer process. In speaking to many negotiators, I've found that they prefer dealing directly with the listing agent and not a third party negotiator. That only allows one more person between buyer and seller that can lead to a misunderstanding. Hopefully you are working with a knowledgeable agent that understands the short sale process and can guide you through your purchase. If you'd like a recommendation to one, feel free to contact me.
0 votes Thank Flag Link Fri Feb 10, 2012
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