Home Selling in San Mateo>Question Details

lexie1263, Home Seller in 92563

can the bank deny a short sale bid even though its more that what is owed?

Asked by lexie1263, 92563 Tue Jul 1, 2014

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if the offer is more than what is completely owed to clear the account, then by definition it is not a 'short sale' - it is a regular sale that will pay off the mortgage loan, and the bank would have no say in the matter - it would be completely between the buyer and seller.

However, there is a difference between 'what is owed' being viewed as the principal balance only, and 'what is owed' being the total amount due to the lending institution to pay off what is owed to it.
A potential purchaser may have discovered, for instance, that the principal balance owed on the mortgage is $300,000.......but If that $300,000 mortgage loan has not been paid for, say, 6 mos at 6%, there is another $9,000.00 in interest owing - and there may be late charges over several years, tax advances, foreclosure fees, etc. as well. In such a case, although the principal balance was $300,000, with an offer of $310,000 - all the additions would probably result in it being a short sale and the lender might NOT approve, depending on what was TOTALLY owed on it
5 votes Thank Flag Link Mon Jul 14, 2014
If the bank gets paid in full then there is no short sale and the bank has no say in the transaction...
However an offer can be more than what is owed and there is still not enough equity to cover real estate closing expenses and still pay the bank all that is owed...and then the short sale still applies and bank approval is required.
3 votes Thank Flag Link Mon Jul 14, 2014
A bid, with conditions, can always be denied. You want a 30 day closing...denied...you want it contingent on an inspection (when it was marketed as "as is")...denied..You want it contingent on the sale of your primary home...denied....
I have had a real estate agent NOT submit my bid, which is just wrong. These agents need to be sued, and/or have their license revoked, but proving it might be next to impossible, unless we start recording everything (lol).
(disclaimer: I am a computer programmer, whom did programming for the real estate field....).
3 votes Thank Flag Link Mon Jul 14, 2014
Lexie,
Yes, a bank can do what they want. If the offer is over the owed amount, but the seller does not have funds to pay their closing costs and commissions, it can still be a short sale. The seller could write a check, the buyer could offer more, all the parties involved could reconfigure a few things to come to an acceptable outcome.
Banks are under no obligation to do anything and often do nothing.
3 votes Thank Flag Link Tue Jul 1, 2014
Let's not overthink this people... if the sale price is more than is owed to the bank(s) then it is not a short sale and no reason to ask the bank permission to sell the house.

A short sale is when the person "owners" look to sell the house short of what is owed to the bank.. then you have to present an offer to the bank less than what is owed to see if they will accept the offer.. if the sale price is nmore than owed.. no short sale.
2 votes Thank Flag Link Tue Jul 1, 2014
If your offer is more than what is owed to all liens on the home and will cover closing costs then it really isn't a short sale and you don't need the banks approval. If they are being paid in full then you should be ok. If the proceeds aren't enough to pay off the lender(s) then you need to get their approval.
2 votes Thank Flag Link Tue Jul 1, 2014
Yes. Many times the banks get many bids on the same home. Just like any other seller they would wait until they have the best offer. Sometimes the proper paperwork isn't submitted and they would reject it. However, assuming everything did go right, perhaps there are other bids on the property or they just didn't get around to accepting it yet.
2 votes Thank Flag Link Tue Jul 1, 2014
if the buyer is paying more than what is owed, then you DO NOT need to go through a short sale. A short sale approval is needed when the amount the bank received is less than what is owed,
1 vote Thank Flag Link Tue Jul 22, 2014
I recently closed a short sale where the bank negotiated themselves to a value LESS that what the buyer offered.

When it comes to short sales there exists only an illusion of rules.
The banks can do what ever they want.
To big to fail, to big to govern.
1 vote Thank Flag Link Tue Jul 22, 2014
John Sacking covered this question properly.
It seems LEXIE most likely worded this question improperly.

Lexie, come back with more details.
1 vote Thank Flag Link Mon Jul 14, 2014
Remember that the price paid is not the amount the lender will net. The net is usually 10-13% less than the price, so like Robin said, paying more doesn't mean the lender is getting all is owed and therefore has to approve the short sale.
Now, if you have an experienced in short sales, active and creative agent, he/she may be able to address the costs issue based on the market value.

How much are you negative? At the end of the day it also depends on your hardship. If your payment is 3000, but your monthly income is 12000, the lender may bot be willing to even accept a 1000 dollar negative short sale. You need someone with loss mitigation experience.

I hope this helps!

Enrique Vasquez-Plaza
REALTOR
Century21 Masters - Covina
480 W. Rowland St. Ste B
Covina,Ca 91723
626-324-0388 cell
626-732-6184 office
626-967-3235 fax
enriquec21masters@gmail.com
CDPE certified
HAFA certified
TRULIA.com Recommended Agent
http://Www.enriqueplaza.com
CA-BRE #01868555
1 vote Thank Flag Link Mon Jul 14, 2014
Yes, it is very possible when there are other liens/costs involved that were not included in the negotiations with the bank. It might be other debts to be considered like: homeowner association dues, property taxes liens, second mortgage, other liens. Additionally, there are sale costs to be included in the negotiations: broker sale commission, closing costs to be paid to buyer, relocation benefit to the homeowner, attorney/title fees, transfer tax. The bank will review the amount after subtracting all these items from the proposed property price, the result is the bank's net, or monies the bank gets from the transaction. Some banks already known in advance their minimum net required for a short sale, and if the net is less than this minimum, it might be denied because they might get more money in the court steps auction, specially when prices are going up and properties have a good demand at the court steps. It is important for the homeowner to hire a listing agent with experience in short sales to get the transaction successfully closed. If you know someone interested in selling their home, please let me know, if it happened to be a distressed homeowner, I am prepared to assist. Maribel Padra, Certified Distressed Property Expert.
1 vote Thank Flag Link Mon Jul 14, 2014
Yes, it is very possible when there are other liens/costs involved that were not included in the negotiations with the bank. It might be other debts to be considered like: homeowner association dues, property taxes liens, second mortgage, other liens. Additionally, there are sale costs to be included in the negotiations: broker sale commission, closing costs to be paid to buyer, relocation benefit to the homeowner, attorney/title fees, transfer tax. The bank will review the amount after subtracting all these items from the proposed property price, the result is the bank's net, or monies the bank gets from the transaction. Some banks already known in advance their minimum net required for a short sale, and if the net is less than this minimum, it might be denied because they might get more money in the court steps auction, specially when prices are going up and properties have a good demand at the court steps. It is important for the homeowner to hire a listing agent with experience in short sales to get the transaction successfully closed. If you know someone interested in selling their home, please let me know, if it happened to be a distressed homeowner, I am prepared to assist. Maribel Padra, Certified Distressed Property Expert.
1 vote Thank Flag Link Mon Jul 14, 2014
All costs have to be taken into account when deciding whether this is a short sale or not. Let's use a very simple example. The amount owed on a house is $490,000. Offer is at $500,000. Broker fee, assorted title fees, transfer tax, accumulated interest, comes to $40,000. There is still a short-fall of $30,000, so it is a short sale. If there are any judgements or liens that must be cleared before title can be insured and transferred, those get subtracted from the sale price as well.
However, if, on the same scenario, the amount owed is only $400,000, then this would not be listed as a short sale, and the seller would just get a pay-off from the bank. If, however, the house is a foreclosure, not a short sale, then it is a different story.
1 vote Thank Flag Link Thu Jul 3, 2014
Yes. As the property "owner" (since they have more equity in the home than the title owners) they have the right to accept or refuse any short sale offer. Often it is not only a matter of price but also of timing, contingencies and the purchaser's ability to close. These all play a factor.
1 vote Thank Flag Link Tue Jul 1, 2014
Yes. The bank makes all decisions on what to accept and the terms.
0 votes Thank Flag Link Tue Aug 19, 2014
If the net is less than the net approved, they will decline it.
Web Reference: http://FastSoldHomes.com
0 votes Thank Flag Link Sat Aug 2, 2014
This depends on the circumstance.

1) Offer is Greater than what is owed but after all fees are paid, the net balance is less than the full payoff amount. In this case, although rare, the bank could deny the short sale.

e.g. Purchase Price $500,000
Loan Balance $ 480,000
Commissions $30,000
Other Closing Costs: $4,000
Balance to Seller $-14,000
In this case, the seller would need to decide if they are willing to pay 14,000 to get out from under the house or they would need to convince the bank to accept the short sale.

2) If the offer made is greater than the loan balance and after paying all closing costs there is a balance left over for the seller, than the property wouldn't be considered a short sale. At this point it would be up to the seller entirely whether or not they would accept the offer.

e.g. Purchase Price $500,000
Loan Balance $ 450,000
Commissions $30,000
Other Closing Costs: $4,000
Balance to Seller $16,000
0 votes Thank Flag Link Sat Aug 2, 2014
Absolutely. Remember to laugh out loud the next time you hear anyone suggest that our titans of finance are the best and brightest and need to be given special attention and consideration. In my over 25 years of experience as a full time broker and another decade plus in dealings with them, I've been convinced in general that their stupidity is only surpassed by their arrogance.
0 votes Thank Flag Link Tue Jul 22, 2014
Absolutely...banks have the final say in short sales and often deny these offerings based on terms and conditions not easily seen. There may very well be greated debt associated with the property in the form of taxes, fees, and/or liens which needs to be considered.

Just keeping it real!

Bill
0 votes Thank Flag Link Tue Jul 22, 2014
Short sale is never a sure thing. We have 40% probability to get the property at or close to market price.
They often counter back.

Sam Shueh, cdpe
Keller Wms Realty

http://x299322.yourkwagent.com/
0 votes Thank Flag Link Mon Jul 21, 2014
1.the bank can do whatever it wants to do

2. are you sure you're not confusing a bid that is over the LIST price, with one that is over what is owed on the house?
0 votes Thank Flag Link Sat Jul 19, 2014
Then how is it even a short sale?? A Shor sale is when the bank agrees to take LESS than what is owed!! If it is more than what is owed why wouldn't the owner then just be able to sell it to the buyer without any bank involvement??
0 votes Thank Flag Link Sat Jul 19, 2014
Hi Lexie

In a short sale a Seller has to seek approval from the bank to get an Okay.

Hence, a bank can always deny an Offer, if the Bank feels that the valuation is higher now or
Suspects frauds that the seller is Selling below market and also, when the Seller goes to
Market, Just shortly before Judicial Foreclosure starts.

It's not uncommon for Sellers to stay in a home too long or start the foreclosure process a bit too
Late.

Good luck
Ruth

http://Www.ruthandperry.com
0 votes Thank Flag Link Sat Jul 19, 2014
Yes, if the bank feels the short sale is worth more.
0 votes Thank Flag Link Sat Jul 19, 2014
Just like any other seller, the bank can accept or reject any offer. There is more to an offer than price; what are the terms of your offer? Offers that can close in 30 days or less, with no contingencies and large earnest money deposit are attractive to any seller.
0 votes Thank Flag Link Sat Jul 19, 2014
It's highly unlikely, there must be some other issues regarding the purchase contract. If the terms and conditions are not complying with the banks rules, maybe that's the reason
0 votes Thank Flag Link Fri Jul 18, 2014
If the bank is paid in full and the home sells for more than what is owed, including back payments, commissions and closing cost then the home would not be considered a short sale.

Maybe the situation on this home is that there is not enough to cover all the cost involved with the short sale itself. As well, there might a notice of default on the property and there are fees/fines as well to get the home out of going into a foreclosure status.

The bank has the right to refuse a short sale and it is their right to approve or deny the sale.
0 votes Thank Flag Link Wed Jul 16, 2014
There is no cut and clear direction. Some times lender sells a lower price to others even you offer higher, cash.

It is like jobs. The employer is equal opportunity employer. Some one less qualified than you gets the job.
0 votes Thank Flag Link Wed Jul 16, 2014
There is no cut and clear direction. Some times lender sell a lower price to others even you offer higher, cash. It is like jobs. The employer is equal opportunity. Some one less qualified than you get the job.
0 votes Thank Flag Link Wed Jul 16, 2014
Question seems weird....If the new buyer is paying more than is owned on the bank loan, its not a "SHORT SALE."

Specific answer to your question is that the bank MUST accept any payoff that matches the current loan balance.

JERRY
0 votes Thank Flag Link Mon Jul 14, 2014
The bank cannot net more than what is owed on the mortgage, this would not be considered a short sale this would be considered a normal sell that takes place with the rest of the proceeds going to the sellers pocket. Pretty straight forward transaction and should be an easy close
0 votes Thank Flag Link Mon Jul 14, 2014
Additionally, if the NET TO THE BANK(not the price) is higher than whats owed, this becomes a standard transaction or equity seller, which you can handle with authority, since no money needs to be forgiven.

To me sounds like a very easy case!
Good luck!

Enrique Vasquez-Plaza
REALTOR
Century21 Masters - Covina
480 W. Rowland St. Ste B
Covina,Ca 91723
626-324-0388 cell
626-732-6184 office
626-967-3235 fax
enriquec21masters@gmail.com
CDPE certified
HAFA certified
TRULIA.com Recommended Agent
http://Www.enriqueplaza.com
CA-BRE #01868555
0 votes Thank Flag Link Mon Jul 14, 2014
If the sale price is more than what is owed the transaction is not a "short" sale, it is just a normal sale. You would simply close on and pay off the amount owed, the bank would have no reason and no grounds to not allow. If the price is less than what is owed than absolutely they can stop/block it and you should fully expect them too.
0 votes Thank Flag Link Mon Jul 14, 2014
You are also incorrect that it is not a short sale if the offer is more than what is owed. The offer may cover the mortgage, but there may be additional mortgages or liens subsequent to the mortgage which are not covered by the offer price, In which case it would still be a short sale
Flag Mon Jul 14, 2014
That is incorrect. It is true that the bank must agree to accept the offer if it is less than what is owed, that is what makes it a short sale. If the price is validated by the comparable sales the bank finds when they hire a separate broker to preform a BPO (broker price opinion) or appraisal, they may well accept the offer. It helps to have a good short sale specialist attorney who will negotiate with the lender(s) being ask to accept less than what they owe. So yes, they can reject a "short" offer, I disagree that, "you should fully expect them to". If the seller can demonstrate "financial hardship", and if handled correctly by the seller's broker & attorney, lenders accept short sale offers routinely.
Flag Mon Jul 14, 2014
Why would you do a short sale if you can get what is owed?
0 votes Thank Flag Link Mon Jul 14, 2014
If the offer is more than the amount owed why would a short sale even be attempted? A short sale is when the seller owes more than the property is worth.
0 votes Thank Flag Link Thu Jul 3, 2014
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