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Short sales sound like a dream way to for struggling homeowners to escape foreclosure whilst the buyer gets a bargain price and the bank left holding the mortgage eats the difference. If only it was that simple!

A homeowner from Miami, Florida shares his experience of the short sale process with The Palm Beach Post.

Unable to find decent paying jobs close to home without having to commute, Mr and Mrs Capiro of Palm City were forced to put their home on the market to allow them to move closer to work. They hoped to cover outstanding mortgage costs and were pleased when a buyer emerged however the deal fell through because of a title dispute.

The Capiro’s decided to petition the lender for a short sale (definition: a bank consents to selling a home for less than the outstanding mortgage balance). Six months later, their lenders have yet to accept an offer and the Capiro’s home is on the brink of foreclosure and is schedule to be auctioned on the courthouse steps on the 15th July 2008.

The homeowners’ realtor confirms that they have a ready, willing and able buyer sitting by patiently, to get qualified. The bank has rejected several offers and asked him to submit the sale paperwork again and again. A story repeated all across the country.

If the foreclosure is finalized, the bank stands to lose more money than it would if it allowed the short sale and the sellers credit rating would have taken a lesser hit than it will if their home goes into foreclosure.

The National Association of Realtors have identified that 94% of realtors have been involved in short sales and of these, 94% have faced obstacles from the lenders. These issues included disagreements about market value, uncertainty about documents needed, the lack of response by a lender or service and other problems.

The Capiros lenders declined to comment on their case citing customer confidentiality. However, they did state that when it receives an offer to take a short pay-off on a loan, the company has to clear the amount with several parties, such as mortgage insurers and second lien holders. The bank confirmed that ‘If one or more of these stakeholders says the offer price is below fair market value, or the minimum amount they are willing to accept in a short sale then the bank has no choice but to communicate the offer is denied.

West Palm Beach’s new Foreclosure Assistance Center have in excess of 300 clients of which 32 were pursing a short sale and only 17 of those got the go ahead from their lender to give it a try. A representative explained that for each case, the bank required so many documents to justify the short sale hence it took them 24-40 hours to assemble a single short sale file. Trying to then speak with the lenders was another ordeal and it isn’t unusual for them to be placed on hold for 20, 25, 30 minutes before they got through to the lender.

The spokes person continued “When you are conducting a short sale, somebody is giving up a significant amount of money, so you would expect there be problems” .

Source: The Palm Beach Post