Just because Minnesota short sales are advertised does not mean that they have been accepted by the bank. It simply means that the seller and listing agent have advertised it in the hope that someone buys it and the bank accepts the buyer’s offer.

In reality, the list price of the short sale may not be the actual price that the bank accepts. It could be so high that no one would offer to buy, or it could be so low that banks cannot accept. Remember that the bank has the right to approve or disapprove the short sale because they get to receive an amount that is less than the mortgage due of the seller.

So what are the factors that cause the bank to reject a short sale?

One is that the price of a short sale is too low. In negotiating for a short sale, banks require appraisals and sometimes BPO. They also require a comparative market analysis so they could see if the price of the offer can be justified. If they find out that foreclosing the property is more financially sound, they would reject the short sale. The seller or short sale agent can argue through comparable sales to prove that a short sale is more valuable to the bank than foreclosure.

Another reason for rejection is an incomplete package for short sales. If the documents are not complete, the short sale may not be approved. In some cases, some documents may even be misplaced by the bank itself. What the seller or agent should do is always keep a second copy and lists of documents that they submitted so that they can provide the lacking documents required.

If a seller does not qualify for Minnesota short sales, the bank would reject the short sale. Disqualification may be due to invalid reason reflected in the hardship letter and availability of assets that can be used for a repayment plan. It is important that the seller’s hardship letter will show valid reasons such as job loss, death of a family member, severe sickness or accident. There should also be a negative value on their profit and loss statement or monthly budget.

Finally, the buyer’s disqualification can be a reason for rejecting the short sale. An evaluation of the buyer’s credit history, debt ratio, years on the job and other criteria will determine if the buyer is qualified for the short sale. The buyer has to submit a loan preapproval letter to gain credibility to the seller’s bank.