Why would a lender allow a short sale?
You need to know the lender's perspective in a short sale.
mortgage lender will be considering a number of factors in deciding
whether to approve a short sale. A review of your circumstance, whether
you deserve a break due to financial hardship caused by uncontrollable
circumstances such as death, divorce, layoffs or illness. They will also
take a hard look at whether it would be cheaper (or more profitable to
them) to simply proceed with the foreclosure process on the house, make
any necessary repairs and sell it through an agent. How many other real
estate owned (REO) properties they have in their portfolio will affect
their decisions as well.
When a borrower falls behind on their payments the loan is usually sent
to the lender’s loan loss mitigation department. Most lenders also
consider short loan payoff sale requests in their loss mitigation
Your chances of success with your lender improve if your communications
with them is organized and complete. Your contact with your mortgage
lender’s loss mitigation department should be professional. You’ll want
to send them the appropriate documentation and provide them with any
additional information that they may require.
in mind that lenders will approve a short sale as a last resort to avoid
foreclosure. If a home was purchased at the height of the market and has
depreciated considerably, the home may be “upside down”, or is worth
less than is owed. The lender may consider a short sale. The same is
true for a property was recently refinanced at 100% or on an option arm
leaving the property without equity.
Keep in mind that lender is not in a position to manage property they
are in the lending business. A home, while it’s sitting vacant waiting
for sale, is accruing costly insurance premiums, taxes, repairs and
bringing in nothing. The lender is losing even more because the lost
interest they could be receiving on their asset. They have their money
invested, but are making nothing from the investment until the property
sells. If a short sale can be accomplished, their money is returned and
they are no longer losing money on the investment. In a short sale the
bank may even be willing to finance a new owner, making it a win/win for