Why Would any Bank Deny a Short Sale?

Let's get past the obvious one first here. If the initial offer is way too low then forget about it. Some banks don't counter back at all in these situations. Well maybe with a 'give us a better offer' but often with no details on the actual price the want. There are always exceptions but be prepared for some crazy responses.

A big issue is the second. We all understand or believe that if the 2nd lien holder doesn't take the measly pennies offered from the first they won't get a dime. So as Realtors we pound our all-knowing chests and spout out 'you're crazy it's this or nothing'. Well not if the 2nd lien has purchased their own PMI (Private Mortgage Insurance). Some lenders have done this on their loans. So if you are dealing with a second trust that is fighting hard, not necessarily a HELOC, then ask the question - Do you have PMI on this? If they say yes you can see why they are sticking to their guns. If it forecloses they will still get 20% back from the PMI insurer.

If this is the case and the 1st lien holder is holding tight on the amount then get on the phone/fax/email and explain the situation and that if they don't allow the amount to the 2nd they are looking for that they will not release the lien for sale.