Dance When You Receive Short Sale Approval

Short sale approval letters play hard to get.

Have you ever seen a happy dance? It’s probably not as well choreographed as anything on Dancing with the Stars. In my mind, it’s a little Irish jig that someone might do if they are victorious. I’ve done lots of jigs. In fact, each and every time I receive a short sale approval letter, I dance another Irish jig. But… my dance is frequently interrupted.

Obtaining short sale approval letters is stressful. Obtaining approval letters takes time–sometimes so much time that everything else in your schedule can go by the wayside. Sometimes we have to beg, plead, and practically offer our first born in exchange for the long-awaited short sale approval letter. Other times, that letter just comes through the fax machine unannounced.

No matter how you get your approval letter, one thing is for sure: you must check and double-check all the details of that letter immediately upon receipt. Never assume that the letter is correct–that it has the correct name of the buyer or the seller, that it has the correct loan number or the correct net amount due lender. You must carefully check all of this before moving forward. These letters frequently contain errors, so your attention to detail is vital at this stage of the game.

One thing that I always recommend is that you carefully review your short sale approval letter before putting on your dancing shoes.  Specifically, have the escrow or title officer compare the approval letter to an updated estimated settlement statement. Although an estimated settlement statement is always sent with the short sale package, the dollar amounts and lien release information sometimes changes during the course of the short sale term. Because of this, it is vital to “crunch the numbers” in order to assure that the short sale approval letter works for the short sale transaction.

Here’s a list of items to review before dancing:

• Buyer’s Name Many approval letters are buyer-specific. If the buyer’s name is on the approval letter, is it spelled correctly? Are all buyers listed?
• Seller’s Name Assure that all of the sellers’ names are listed on the approval letter and spelled correctly.
• Loan Number Confirm that the loan number on the approval letter matches the loan number on the mortgage statement.
• Second or Third Liens Confirm that the letter references other liens, if necessary.
• Net Amount Check that the net amount is realistic given your purchase price. Compare to an estimated settlement statement.
• Fees Paid The approval letter may specify fees to be paid by the bank. If so, assure that the bank is paying all necessary fees.

Now, sadly I do not always practice what I preach. I have been guilty of dancing an Irish jig each and every time that an approval comes into my inbox. That’s hundreds of jigs this year—so many that I am beginning to get blisters on my feet. Then, when the dance is over, I sit down and check out the approval letter—only to learn of an error or a correction that needs to be made.

So, the next time that you receive an approval letter, slow down, and take a deep breath. I congratulate you. Obtaining that letter is a big milestone. But, do not pull out those dancing shoes until you are sure that you have what you need to close the transaction.