Short sale approval letter

12 Replies

I am working with buyers on a short sale and they have an accepted offer with the seller and the short sale negotiator informed us that bank accepted offer as well. Short sale negotiator office was suppose to send buyers atty P&S, but we received word that the signing of P&S would be delayed a couple weeks because bank needs to produce written approval letters. Should the bank approval letter really hold things up another few weeks. Does every short sale require an approval letter? Understand it's a short sale, but just want to understand the necessity of the approval letter and keep this thing going!

@Kevin Barrett  

Not too long ago I worked for a third party company that would help facilitate short sales for a big bank. Now back to your question about the approval letter. In our world, at least, it meant EVERYTHING. If we did not have an approval letter on file (a scanned copy of what was being sent to the seller) that property would go no where PLUS we as a company would NOT get paid without that letter.

In regards to the time frame, every transaction will operate faster/slower that the one before it, no two deals typically moved in the same amount of time. Based on what you're saying you're in good shape to close, just have to be more patient. Now that's not to say it'll close 100% because stranger things have happened, so unless your clients the buyers walk you should be okay.

@Kevin Barrett  

Something is amiss here. The purchase contract is the First thing that happens (except for a FHA ATP process). The Approval Letter comes After the purchase agreement, short sale package submittal, BPO, etc. What are we missing here? Are you referring to an Addendum to the P & S agreement, to reflect the new terms of the Approval?

Thanks for the valuable insight @Derek Smith .

@Wayne Brooks and anyone else that would like to reply here is some more details regarding this short sale:

The listing agent said:
"we need a signed price addendum with the new offer price in order to obtain the approval letters. Forward that to me as soon as possible and I will get it signed by the sellers so we can move forward"

I sent an updated offer for the sellers to sign then the short sale negotiator said that he would be sending the P&S. As the P&S date read "7 days post lien approval" we discussed that the post lien date would be last Friday since that's when the buyers said they would accept the banks counter offer.

We expected to sign the P&S this week, but now we are being told that it will take another 2 weeks to get the approval letter from the bank so we need to postpone the P&S date.

Since the bank came back with a new offer and my buyer's accepted I was hoping to move on to the P&S asap.

What do You mean by "P&S date"? P&S(purchase and sale) usually refers to the purchase and sell agreement(contract). Are you talking about the Closing date? I assume so, since you said "7 days post lien approval" which I assume means "closing to occur 7 days after short sale Approval Letter is issued". The negotiator is telling you he needs a price addendum to the contract reflecting the revised price....all standard issue stuff. Yes, every short sale requires an Approval Letter. This is the only way the closing/title co. knows they can close, while sending the lender of record less than the full pay off! The Approval Letter tells the closing agent exactly who gets what, and how much, to the penny, has to be received by the lender.

@Kevin Barrett  and @Wayne Brooks  

The process does sound a bit off, however, I will be the first to admit that our process didn't always happen in the order it should be. Meaning, our agents on the floor would constantly use the reference of an approval letter often because that was the end goal in mind. Now, in regards to the order of the process taking place, because our agents sometimes decided to follow their own unbeaten path, they would sometimes find themselves trying to procure documents they should've gotten in week 1 versus at time of closing.

It is difficult to say exactly what is going on other than the bank doing what to do best, take they ole so sweet sweet time!

@Wayne Brooks I was referring to the Purchase and Sale contract being 7 days post lien approval. It sounds like approval letter comes before the Purchase and Sales. And the P&S is 7 days post-receiving the approval letter.

@Kevin Barrett  

I have no idea what you are talking about. Are you telling me you do Not have a signed purchase contract for this property between your buyer and the seller? An "accepted offer from the seller" is a contract. The bank will not process the short sale without a purchase contract.  Also "lien approval" is not a term I've ever heard with short sales.  Maybe you mean "lien holder" approval?  I still think you're just looking for the executed contract addendum reflecting the new price, then the Approval Letter should be issued in 1 to 2 weeks, then you can close.  As you mentioned, they requested a "price addendum".... an addendum, is an addendum to an executed contract.

Kevin - 

I am concerned that the Seller's reps are workin a back to back transaction so they get the spread- which is fine, thats what I do, but I ALWAYS disclose it to my back end buyer,  you should ask " Will it be MY BUYERS names be on the approval letter from the BANK that is short saling"? 

I have never received a counter offer - nevermind an approval letter w/o a solid signed and SUBMITTED P&S.

Also - did you Buyers sign an "Armslength Agreement" - if not - that is strange.

The language on all my P&S say "within 30 days of written 3rd party approval acceptable to both buyer and seller" don't know what this "post lien" stuff is.

I live in Acton currently, let me know if you want to chat, I am more than happy to do so.

- The bank does not sign the Purchase & Sale agreement.

- You can not close without a written Approval [Letter]

- Yes it can take weeks for the approval letter IF it is only conditionally approved by the servicer and not by the investor.  If its investor approved then it should only take a few days.

@Robert Conroy  Here's the latest on the short sale:

- Listing Agent informed us that both lien holders are generating an approval letter and should be able to send us those soon. 

- Both attys are fine with signing the P&S as they believe the approval letters will arrive shortly.

cool - give me a shout if you hit any bumps, or have questions.....

Also - if you have any distressed, outdated, or non-retail properties in the area - let me know - I;m buyin - (3+Brs/1000+sqFt, SFRs and Multis)

Best of luck - Happy 4th!

Buyer and Seller are supposed to sign the Purchase and Sale Agreement ("subject to Short Sale Approval") prior to submitting the offer to the bank.

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