All Parties Must Perform
When I was a real estate novice, I had trouble understanding how what I perceived to be a simple transaction had so many hiccups and hurdles. What I later realized was that it takes many different parties to effectively put together and close a real estate transaction: listing agent, selling agent, buyer, seller, buyer’s lender, buyer’s agent, seller’s agent, settlement agents, an attorney and a title company. And, if one of those parties is less effective or efficient than the rest, that may impact when and if the transaction closes.
With short sales, there are even more parties involved in getting the sale to close on schedule. In addition to lenders, appraisers, inspectors, buyers, sellers, two agents, and a settlement company, there are also short sale lenders that can easily bring down the house.
When a short sale lender has approved a short sale, the short sale lender sends a formal approval letter. Most short sale approval letters state the date upon which the short sale must close. Because there are so many parties involved in effectuating a closing, it is not uncommon to be approaching that closing date on the approval letter only to learn that the transaction may not close on time. Common impediments to an on time closing include loan documents that have not yet been signed, or a buyer (or seller) not performing on another portion of the contract.
What To Do If You Cannot Close by the Date on the Approval Letter
If you cannot close by the date on the short sale approval letter, this might mean trouble. In many cases, the short sale lender will grant you an extension. A written extension must received; your title company or settlement agent will not permit you to close until you have received that extension.
Here are three things you need to be aware of when requesting an extension on your short sale approval letter:
- Short sale lenders don’t like to do the same thing twice. Learn the realistic closing date before contacting the short sale lender for the extension. Don’t just say that you need a week, and then later learn that you need two. Prior to requesting the extension, contact all parties to learn the realistic date and ask the lender for an extension until that date.
- Check dates on all approval letters. If you have more than one short sale lender, make sure that your second short sale approval letter will not expire before the new closing date. If so, don’t forget to contact the other lien holder for a revised approval letter as well.
- Make sure buyer loan documents or the mortgage rate lock will not expire. If your buyer has already signed loan documents or has locked his interest rate, the buyer needs to be aware of the risks involved. Short sale lenders are unpredictable. And, it may take several days (or sometimes weeks) to obtain the necessary extension on the short sale approval.
Error on Your Part
Have you ever heard the phrase, “An error on your part does not constitute an emergency on my part”? When you request your extension, keep in mind that this may be the response you receive (or some version of it) from the short sale lender. Although you may be receiving lots of pressure, don’t do anything that may put your deal at risk. At this point in the transaction, you are at the mercy of the lender. Be pleasant, persistent, professional, and patient; that should help to assure that you receive your short sale approval.
