Common Reasons Banks Reject NJ Short Sale Offers

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There is a lot of ambiguity in the world of short sales. During the whole NJ short sale process, no one knows if an offer will be accepted or rejected from the bank except the bank itself. Short sales require complex documentation and listings can be misleading—not every property advertised as a short sale is a short sale. When listing agents advertise a property as a short sale, sometimes they are just hoping the bank will take a low offer. Because of the abundance of uncertainty involved in short sales, it is important to know the top reasons most banks cite as reasons for rejecting an offer.

Despite common belief, a seller does not have to be in foreclosure or bankruptcy for a short sale to occur. If the selling fees on top of the remaining mortgage are enough to put a seller under water, the sale of any property can proceed as a short sale. However, banks almost always require a ton of documentation before they will consider a short sale offer. While a NJ real estate agent who has experience handling hundreds of short sales could probably tell you if a bank will accept or reject an offer, it can be an arduous task for real estate agents unfamiliar with the process.

To give your offer the best chance of getting accepted, pay attention to these common reasons banks decline short sale requests:

The Price Is Too Low

The listing price of a short sale has little bearing on the price a bank may or may not accept. Often, listing agents will try to keep the list price low to attract more interested buyers and competitive offers. A bank, however, will not accept a list price that is too low—even if the seller accepts the offer. Banks can request one or multiple appraisals to determine the value of the property. It is helpful for the short sale agent to submit a comparative market analysis to justify the price of a potential offer. No matter what, the final sales price of the property is completely at the discretion of the bank. If they think they could make more money through foreclosure proceedings, they will reject the short sale offer.

Documentation Is Incomplete

Without every single required document, the bank will typically reject a short sale offer. A short sale package is a complex series of documents and even one mistake on any of the paperwork can cause a bank to reject the short sale. This is why working with a New Jersey law firm experienced in short sales (alongside your NJ realtor) can save you a lot of headache down the road. Be aware that banks are notorious for losing documentation. Keep copies of every document you provide in the event your paperwork gets lost.

The Buyer Does Not Qualify

Just because a buyer is motivated and can afford a mortgage does not mean they are qualified to purchase a property. The bank will look at the buyer’s credit history, employment history, debt, and evidence of sufficient assets. Buyers will need to have evidence of a loan prequalification or a loan pre-approval letter included in their short sale paperwork.

The Seller Does Not Qualify

If the seller is seeking debt forgiveness, the bank will need to receive sufficient evidence from the seller that they truly are unable to pay back the shortfall difference due to financial hardship. The seller typically stands a better chance of getting the short sale offer accepted if they are able to work with the bank to create a repayment plan. If the bank determines the seller does not have sufficient evidence of financial hardship, they may reject the short sale offer.

Our team at Veitengruber Law has years of experience helping clients negotiate real estate sales and complex short sales. We know what banks want to see in a short sale offer and will work with you to create an offer that has a high chance of being accepted. Call us today at 732-852-7295 for your free consultation and to start discussing your real estate plans.

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Short Payoff vs. NJ Short Sale: Which is Right for You?

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Understanding Short Payoff

 At Veitengruber Law we strive to help our clients in individualistic ways. When referring to New Jersey law and short payoff there are requirements that we can help you more easily navigate with the lender. In a situation where a short payoff might be a better financial solution for you than a NJ short sale, here is some preliminary information that will be helpful.

 

Short Payoff is a newer, alternative option for the borrower to consider when facing a foreclosure. This involves the option for the borrower to keep the property and pay back the lender at a reduced amount, especially if the homeowner owes more than what the property is currently worth. This could be the ideal answer if the borrower is NOT having trouble with mortgage payments.

 

Not all lenders will be willing to work with this option however, and as mentioned before, Veitengruber Law can help you in navigating key requirements.

 

Short Sale Basics

 

A short payoff should not be confused with a short sale. A short sale would inevitably involve you losing your home but you would also be able to avoid foreclosure. The process of a short sale and New Jersey law involves selling the property to a third party at a price that is less than the amount the homeowner owes on their mortgage. This option also involves the lender agreeing to the sale price as satisfying the homeowner’s debt. For example: the home is valued at $250,000 and the homeowner finds a buyer for $200,000; the lender must then agree to the price of $200,000 and release the mortgage despite being “short” of what was originally owed, thus resulting in a short sale. The homeowner must also be able to show that the market value of the home was decreased.

 

This is generally the right solution if a homeowner is having trouble making the monthly mortgage payments on time or at all, because continuing along this path usually leads to default, which then leads to foreclosure.

 

Short Payoff Key Requirements

 

There are clear criteria you must meet in order for a lender to consider a short payoff as a means to resolving your debt. You would be required to pay off the debt in a single payment because there are no payment plans. This would also entail you being able to acquire the funds with respect to your damaged credit, which often involves another person becoming involved who is not a borrower on the loan. On the flipside, if you have good credit, a short payoff can be beneficial if you are simply looking for an option allowing you to move away from the property.  This may require establishing a substantial market value decrease while also being able to show a proper income and excellent credit. Short payoff also requires the completion of an application similar to a short sale or modification instead of facing foreclosure.

 

 

How Do I Decide?

 

Now the question is ultimately:  Short Payoff or. Short Sale?  How do you decide which is the best option for you?  A short payoff would likely leave you with little negative affect to your credit while getting rid of the property.  A short sale would be ideal if you are behind or will begin to be behind on mortgage payments, in order to avoid foreclosure.

 

Veitengruber Law can help you navigate with lenders and New Jersey law regarding both options. We pride ourselves on offering a thorough FREE holistic debt relief evaluation to get you started on the right answer for your situation.