What Does Approved Short Sale Mean?

Today short sales of homes have become more common as people are trying to sell ther homes before losing them to the bank via foreclosure. As daunting the process is, there is a madness to the process they have. Unfortunately, not all banks work on the same guidelines and time lines. Some banks have responses within 30 days of submitting an offer and others take six months or longer. So what if you are lookng at a house that is advertised as a short sale. You read in the comments that it is an approved short sale. What does that really mean.

The perception is that if it is says the house is short sale approved; then the price is an acceptable price to the bank. However; this may not be true. In order for a homeowner to short sale a home they need to prove that they have a legitimate hardship. The hardship can be loss of job, divorce, underemployed, medical, etc... The listing agent submits to the bank a copy of the listing agreement, hardship letter and finacial affidavit showing income and expenses. If everything falls in line the bank will accept a short sale on the house. Thus, the home is short sale approved.

Now, there is no way to know what the final number the bank is willing to accept on the house until an offer is presented to them. Prior to that it is just specualtive. So, unless the lisitng agent had an offer on the house and the bank countered that offer with another price, and the listing agent changed the sale price to reflect that change you do not know what the dollar amount the bank will accept is. Sounds confusing. However; it boils down to the bank letting someone know what their bottom line on the house is today and advertising it as such.

That number is subject to change as well. Depending on when they approved the original deal they may request another BPO (Broker Price Opinion). That value can change the acceptable price the bank accepts up or down. I have witnessed it happen both ways before. The approval a bank gives is for a specific deal and buyer. If that buyer backs out of the deal for any reason the bank is not obligated to sell the house to someone else at that price. There are variables that can change the bottom line dollar amount for the bank. Type of finanicng, when you want to close, proerty taxes, home owners association fees etc....

So, depending on the situation an approved short sale may not mean you can close in 30 days or sooner. It could mean that the bank is willing to accept a short sale or it could mean they have an agreed upon price. The best advice I can give someone is to have your Realtor call the listing agent and ask them what they mean by approved short sale. Because to different people it means different things.

Dave diCecco
Realtor/Broker
www.davedicecco.com