What If My Short Sale Is Not Approved? | Do I have Options?

Today's question is, what happens if my short sale is not approved?

I'll be discussing with you some of the options that might be available to you in the event that your short sale is declined for whatever reason.

1. Going Back to the Buyer. 

If a lender comes back with a higher counteroffer, you can always take that back to the buyer, present it to the buyer's side, and see if they'll come up to meet that higher offer

2. Value Dispute. 

Oftentimes, we see that short sales are declined because the lender comes back with an inflated BPO or Broker Pricing Opinion. And that's just a fancy way of saying the lender's appraisal. Oftentimes, these lender appraisals don't accurately capture and reflect fair market value because they're not very thorough. It's a very superficial appraisal. 

So if we go back to the buyer and present them with this higher counter, and if the buyer says, "No way, I'm not paying that. That's way too much," well, at that point, we can always initiate a value dispute with the lender. And to support our assertion, we provide certain documentation like comps, repair bid estimates, and an inspection report to get the lender to come off of that inflated value so that the offer price is more in line with the true fair market value of the home.

3. Wait and Re-List. 

In some cases, it's not the inflated BPO that results in a short sale being declined, but the borrower financials that aren't compelling enough to warrant a short sale. Especially within the context of an FHA short sale, the borrower has to satisfy certain financial eligibility requirements in order to qualify for a short sale. 

So if a borrower doesn't have a low enough credit score or if the borrower makes too much money, then in that case, the FHA might say, "No, we're going to decline that." So the best thing to do in that situation is to wait until the borrower's financials and the borrower's credit scores dip to a point low enough where the FHA guidelines essentially force the lender to approve a short sale. So once we get the borrower financials to a point where they need to be, we can always relist the property and try again.

4. Bankruptcy

If all else fails, you can always declare a Chapter 7 bankruptcy to discharge any mortgage debt related to the property, as well as any unsecured debt that you might have. If the lender, for whatever reason, just refuses to cooperate and refuses to approve a short sale and settle that debt, you can force the lenders hand into discharging all of the inherent debt by declaring a Chapter 7 bankruptcy so you can get a fresh start.

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