When short sales entered the Jacksonville real estate market, they quickly gained a bad reputation.  At that point, very few agents were trained in them and quite a few were running around trying to do them.

Fast forward.  The majority still have not been adequately trained in short sales.  We quickly recognized that it was going to be necessary to learn about, and master, short sales in the coming real estate market.  So we set out to learn from the masters of short sales.  We sought out agents who had been doing short sales successfully for years.  And we learned from those who knew the exact method to get short sales completed successfully. 

If the short sale package is put together completely, and the submitted offer meets specific criteria, your short sale will be accepted as a rule...not an exception.  There are a few common problems leading to so many Jacksonville short sale failures. 

Here are the top three that we see:

  1. First, the offer is too low.  Banks are in the business of making money, not giving things away.  A bank will never accept an offer that is too low.  There is a general rule of thumb for where you need to be for a conventional mortgage.  There is a specific percentage in relation to fair market value that the offer has to be at for FHA (82%) and VA (88%) for the offer to be approved.  We regularly get offers in the 70% range and below on our short sales.  This is too low.  A bank would rather foreclose and try to sell the home on the open market than take a lowball that will net them less than what they believe a foreclosure will.  It has to make financial sense for the bank to let the home go in preforeclosure or they will reject the offer.  It is important to get your offers correct to start with.  Our most recent offer on a short sale listing with an FHA loan was was 75% (Bank's net to FMV of property).  HUD requires 82% currently.  The house was already priced below any sold comp in the history of the subdivision and was the lowest active comp.  Fortunately, we were able to negotiate the offer up to the required 82% ratio, assuming a likely appraisal price which is always a wild card.  Another offer we got this past week was at a price level that would only result in a 70% net to the bank which is too low.  We can always tell when we have an educated and experienced short sale agent make an offer because the offer is clean and the ratio is always exactly where it needs to be.  The key is to put in the lowest possible offer that the bank will accept.  We've heard of buyers going around to property after property putting in lowball offers that are rejected, either by the seller or the bank,  then declaring that it doesn't work.  No, it doesn't work when it's not done correctly.

  2. Second, the loss mitigation package is not put together correctly.  This is very important.  Loss mitigation departments are overwhelmed.  If your package gets put down because it is incomplete, sometimes it is weeks before the loss mitigator will pick it up again.  We have heard of agents sending in pieces of information.  We've heard of them sending in a contract and nothing else.  We've heard of them sending in little bits and pieces as they get them and I could go on.  A loss mitigation package should be sent one time, in one piece, and contain all information that the lender needs to make a decision on a deal.  A lender should never have to come back and ask for more information.  Every time they do, that extends your time for getting an answer.  A lender should never have to come back to get the appropriate ratio, especially on an FHA or VA when the correct "answer" has been outlined by the regulatory agencies.  Conventional can be a bit trickier.  Their ratio can be, for some reason, higher than the norm for a conventional loan.  We are working on one where the bank is balking when the ratio is over 85%, which is high for a conventional loan short sale, and should be accepted without question.  The appraisal they are using is also unrealistically high according to recents solds and active comps.  In reality they are getting a net of somewhere in the 90% range if they approve the deal. This bank is clearly behind the majority of banks when it comes to dealing with short sales.

  3. Third, buyers often do not understand that answers are not instant and get impatient rapidly.  It is the agent's job to make sure the buyers are adequately educated, understand the process and have the patience to see it through.  If they do not, then they should never make an offer on a short sale.  Bottom line.  A buyer should fully prepare themselves for it taking a couple of months to get an answer, especially when a second mortgage with a different bank is involved.  We've seen answers come in as fast as one week, but we've also seen them draw out for longer than two months.  It depends on the quality of the information they receive, the bank's process, the different banks involved and the loss mitigator(s) assigned to the case.

These are the most common reasons we see Jacksonville short sales fail.  Whether you are buying or selling, it is crucial that you work with someone highly educated in short sales if you want to be successful.