How a Short Sale Lender Analyzes Your Offer to Purchase

When you submit an offer to purchase a short sale listing, you will first need to have it accepted by the homeowner. Once you and the homeowner have an agreement, your offer will be submitted to the short sale lender(s) for approval. Here are some of the factors that short sale lenders consider when determining whether or not to approve of your offer:

1. The short sale lender will most often order a broker price opinion (BPO) or an appraisal to determine whether or not your offer is a fair price.

2. The short sale lender will consider any costs it may incur for repairs on the property (and whether or not those repairs will be necessary for a short sale or for a foreclosure sale).

3. The short sale lender will analyze the property's holding costs. How much will it cost them to foreclose on the homeowner and prepare that property for sale? How much money are they losing every month that they don't receive a mortgage payment from the homeowner?

4. I very large component that short sale lenders consider is the homeowner's financial position. A bank that is forgiving a large sum of money that is owed to it by a homeowner certainly does not want to approve of a short sale if the homeowner has a lot of money laying around. Would you? The bank will do everything it can to verify the seller's financial position to make sure that there is no other option for the seller other than asking the bank to approve a short sale. The banks also want to see proof of the financial hardship that is causing this short sale. If the bank feels that the financial hardship story is being fabricated, it may not approve of the short sale.

5. Your offer will be assigned to a specific representative at the bank who will be in charge of reviewing all of these components for the bank. Although much of an approval is the result of number-crunching, there is a human element to it... the mindset of the the bank representative. You hope as a buyer that the listing agent (or whoever is communicating with the bank representative) is excellent at working with people and making sure that the bank representative has a positive mindset when dealing with your transaction.

6. Each short sale lender is in a different predicament. No two banks are the same. Some banks have many properties/mortgages that are in default. Others have less in default. The short sale lender will consider the number of properties it has in default before making a decision to approve or not approve a short sale offer.

7. The bank has to decide whether or not it makes financial sense for it to take a loss. Some banks will ask for a quantity of money in order to approve of the short sale.

8. One thing that seems obvious but shouldn't be glossed over is whether or not the homeowner is delinquent on his/her mortgage. Some homeowners pursuing a short sale have stayed current on their mortgage payments. Most banks will not approve of a short sale when they have homeowners that are paying their mortgage.

These are some of the major factors that are a part of most banks' short sale approval decisions. There may be other factors that a bank considers that are not listed here. Be sure to consult with your exclusive buyer agent to determine whether or not it's worth it for you to spend time pursuing a purchase on any short sale property you encounter.