Pre-Approved Short Sales: Are They Real?

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Rumors, just like viruses, spread like wildfire. One of the biggest topics that goes through the rumor mill seems to be the subject of the pre-approved short sale.

Is there some such a thing as a pre-approved short sale? - a short sale whereby the seller calls the bank and the bank agrees to a short sale price and terms in no time flat?

In short, the answer is no and maybe. Often times, pre-approved means that the bank now rules the roost. The bank can dictate terms (including commission), and can also request that the terms and conditions for marketing the property (including the number of open houses required). In this instance, the terms have been approved, but the buyer has not yet been approved. The bank will still need to generate a short sale approval letter.

Another challenge of the pre-approved short sale is that the bank(s) may not approve of certain types of buyers (such as corporate entities or limited partnerships). Of course, this is wildly ironic since it is the seller who owns the property and accepts the purchase agreement, while the bank merely ratifies the sale.

When you hear agents pitch their homes as approved short sales, you must remember that there is more to the equation. Yes, there was a time when you could substitute a short sale buyer at the same terms and conditions and get a new short sale approval letter in a day or two, but these times are getting fewer and further between. With Equator (and Bank of America), you can request a soft decline and the next buyer’s offer is processed more quickly—but the bank may not accept the same terms and conditions.

There are definitely a few short sale programs that generate pre-approved purchases prices for short sale properties. Two such programs are HAFA (the government’s short sale program) and the Bank of America Cooperative Short Sale program. Sadly, these programs seem plagued with problems (slow processing times, dictated and inflexible terms, an exceedingly high list price).

While 2012 is definitely the year of the short sale, pre-approved short sales whereby a short sale is approved in a week or so (and you just have to write an offer) are still just a pipe dream for buyers and sellers alike.

Photo: flickr creative commons by malias

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About Author

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®. Before landing real estate, she had careers in education and publishing. Many folks say that Melissa is genetically pre-disposed to success with short sales. In fact, last year she and her staff obtained over 500 short sale approval letters! When she isn’t speaking with lien holders, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

6 Comments

  1. When the listing says short sale, but approved, I always check with the listing agent to see if the bank has an official number that they will accept. That’s typically because they have rejected a prior offer. In these matters, the experience and knowledge of the listing agent could mean the difference between a smooth transaction or a difficult negotiation with the bank.

  2. You make some good points, thanks for sharing. I am seeing very few “approved” short sales in the Charleston SC real estate market. I’m pretty skeptical whenever I see “approved” posted in the remarks of a short sale listing, especially if they have been on the market for awhile. Short sales very seldom get better with time. Condos can be challenging because monthly regime fees are most likely not getting paid and can add up quickly. I have encountered several condo regimes that will not reduce past due fees. Each property is unique needs to be explored individually.

  3. We still see “short sale approved” in the Boulder area, but it’s an overused term. There’s more to any deal than just the price, and banks tend to look at each deal on its own merits. The bank may have an “approved” price based on a prior deal that fell, a BPO, etc., but the deal itself is not approved until it’s approved. The devil is always in the details . . .

  4. As a real estate attorney in the Tampa Bay area, we see lots of folks looking to do short sales. And pre-approvals are possible, but as you say, the lender always has the upper hand… unless… the seller does their homework and really understands the current marketplace. The seller MUST be realistic and be willing to negotiate with the lender. It takes flexibility and an open mind to create the win-win-win situation for seller, buyer and lender.

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