Loss Mit Services

“The Bank Will Never Approve It” — Why Nobody, Including Me, Can Promise You a Short Sale Approval

Posted on 08. Sep, 2026 by ctlms in Blog

I hear two sentences about short sales from agents, and on the surface they sound like opposites. The first one is "the bank will never approve it," usually from an agent who got burned once and swore off the whole category. The second one is "don't worry, we always get them approved," usually from somebody trying to win the referral. Here's the thing I want you to take away from this post: those are the same sentence. Both of them are a guess dressed up as a fact. Nobody can tell you in advance what a lender is going to do with a file, and after more than 2,000 of these I'm including myself in "nobody."

So then you ask, "Sean, if you can't promise an approval, what exactly am I referring my client to?" That's a fair question, and the answer is worth understanding, because once you know WHY the promise is impossible, you get very good at spotting the people who make it anyway.

Who is actually saying yes?

Start here, because it's the thing most agents have backwards. The company your seller mails the payment to is the mortgage servicer. In most cases the servicer does not own the loan. An investor does. That might be Fannie Mae, Freddie Mac, HUD on an FHA loan, the VA, or a securitized trust with a name nobody can pronounce. The servicer's job is to run the file against that investor's guidelines and, on a lot of files, send it up for the investor's sign-off. Who owns the loan is the first thing you need to know on any short sale, because it tells you whose rules you're playing by.

And those rules are not "does this seem reasonable." They're a box. The file either fits in the box or it doesn't, and a big part of what we do all day is try to make the homeowner's real circumstances fit into the box the best that we can.

What's in the box?

Strip away the paperwork and every short sale decision comes down to three questions.

1. Does the hardship fit? The investor wants to see a reason the borrower can't keep paying or can't bring money to closing. Job loss, divorce, a death, a medical event, a relocation, an unaffordable payment. Different investors accept different hardships and want them documented different ways, but there has to be one, and it has to be real.

2. Does the valuation support the offer? After the offer goes in, the servicer orders its own opinion of value, an appraisal or a broker price opinion depending on the loan type. The offer gets measured against that number, not against the list price and not against what the buyer thinks the house is worth. If the valuation comes back high, the offer gets countered or denied no matter how clean everything else is.

3. Does the net beat foreclosing? The investor compares what they'll clear from this sale against what they'd expect to recover if they foreclosed, took the house back, held it, and sold it themselves. The banks don't do short sales to help people. They do short sales to help themselves, and only when that comparison says so.

Now look at the order those things happen in. The valuation gets ordered AFTER the offer is in. The net gets calculated AFTER the valuation comes back. The investor's answer comes last. So anyone who tells you the result before the offer exists is promising something they have not seen yet. They don't have the valuation. They don't have the net. They don't have the investor's decision. What they have is a sales pitch.

Isn't "the bank will never approve it" the safer bet, then?

No. It's the same guess pointed the other direction, and in my experience it usually traces back to one bad experience with one servicer a long time ago. Times have changed. Files with a real hardship, a market-priced offer, and a complete package get approved every single day. We see it literally every day. What I cannot do is tell you which day, or whether your seller's file will be one of them, until the file is actually built and the valuation is back.

And there's a cost to the pessimistic guess that agents don't always see. When you tell a homeowner "the bank will never approve it," they hear "there's nothing to be done," and the next stop is a foreclosure that might not have been necessary. That's not you being cautious. That's you making a promise about the bank's decision that you're in no position to make, just a negative one.

So what CAN I tell you?

Plenty, and quickly. Before a file is ever opened, I can look at the loan type, the lienholders, and the rough numbers and give you a straight answer on three things:

1. Whether the loan type has a workable path. FHA, VA, conventional, and USDA all have their own short sale programs with their own requirements. Some are more predictable than others.

2. Whether the lien stack is survivable. A quiet second mortgage, a tax lien, an old judgment, an HOA balance. Junior lienholders have to be dealt with too, and some of them are a lot harder to deal with than the first mortgage.

3. Whether the numbers are in a range worth opening a file over. If the payoff is so far above realistic value that no investor's math will ever work, I'll tell you that, and I'd rather tell you now than in month four.

That's an honest answer. It's also a better one than a promise, because I've watched what happens to the seller who was promised an approval. They're the ones who walk in month three when the counter comes back, because nobody prepared them for the possibility. The seller who heard "here's the process, here's the real timeline, and here's what can go wrong" is the one who stays in the deal.

While I'm being honest about timelines: a short sale typically runs 4 to 6 months from start to close, and the lender's approval alone commonly takes 90 to 120 days before you even get to the closing window in the approval letter. If somebody quotes you two months, that's the same old playbook as "we always get them approved."

The takeaway

"The bank will never approve it" and "we always get them approved" are both guesses, because the three things that decide a short sale, the hardship, the valuation, and the net, don't exist until after the offer is in. Nobody can promise the result. What a good negotiator can do is tell you, up front and fast, whether the file is worth opening and what's likely to be the hard part.

So the next time someone tells you they always get them approved, ask them a simple question: how, exactly, do you know that before the valuation has been ordered? Then send me the address and the approximate payoff. I'll tell you within a day whether it's worth pursuing.

As always, feel free to reach out to me with any questions.

Sean Wilder
Loss Mit Services
860-265-3727
CT Debt Negotiator NMLS #828273
Loss Mit Services is a dba of Accredited Home Services, LLC · CT Debt Negotiation License DN-828273