One of the biggest misconceptions about short sales is that the lender is approving or denying specific contract terms.
In reality, the lender’s primary concern is the amount of money they will receive at closing.
The lender is already agreeing to accept less than what is owed on the loan. Because of that, every dollar matters.
The lender is not usually saying:
“We don’t allow home warranties.”
“We don’t allow repair credits.”
“We don’t allow seller concessions.”
Instead, what the lender is saying is:
“If we pay for those items, the amount we receive at closing falls below what we are willing to accept.”
For example, if the lender determines they need $250,000 net from the sale, it does not matter whether the reduction comes from a lower sales price, seller-paid closing costs, repair credits, a home warranty, or some combination of those items.
All of those expenses reduce the lender’s net proceeds.
Think of the lender as focusing on one number: the final amount they receive after all costs and expenses are deducted.
This is why a lender may have the seller counter an offer, reducing concessions, or requesting changes to the contract. They are usually not objecting to the specific item itself. They are simply trying to reach the net payoff amount required for approval.
Understanding this concept helps buyer’s agents explain the process to their buyers and prevents many of the frustrations that occur during short sale negotiations.
This is why a lender may have the seller counter an offer, reducing concessions, or requesting changes to the contract. They are usually not objecting to the specific item itself. They are simply trying to reach the net payoff amount required for approval.
Understanding this concept helps buyer’s agents explain the process to their buyers and prevents many of the frustrations that occur during short sale negotiations.
