Pre-Approved Short Sales, What It Means
Short sale approval letters are settlement agreements written by the home owner’s lender setting forth terms and conditions that the seller must meet through the sale of their home.
Most have an expiration date requiring that the settlement agreed upon be paid by that date. Although it’s of little consequence, in my opinion (as it’s a debt settlement between the seller and seller’s lender), they also stipulate the name of the buyer on the agreement.
This would naturally mean that any settlement agreement would be invalid if the buyer stipulated were to cancel the transaction. However, since the most important factor to the investor who owns the note is the net payoff, an approval tips their hand to the dollar amount they’re willing to accept, regardless of the buyer.
Sometimes a lender will be pro-active about the prospect of a short sale, and will “pre-approve” a sale amount and terms that will be acceptable to a future buyer.
So, a pre-approved short sale is one of the following:
- It’s a property that has previously had an offer that met the investor’s payoff requirements but has lost its buyer-OR-
- It’s a property that has been given a pre-approved price without an offer.
A house is only worth what someone will pay for it. Period. If the investor has pre-approved a short sale that has not yet had an offer, it’s likely they’re unrealistic about the asking price, so the 2nd example above is less likely to be a success, but still possible.
On the other hand, if the property has already been approved based upon a contract that was previously submitted from a qualified buyer, then the terms of that deal can be used to attract a new buyer.
Buyers who find short sales opportunities in the middle of this scenario are often pleased to find that it takes a fraction of the time to acquire a new settlement agreement from the lender.