Steps to Take when Receiving Short Sale Approval
If you have ever received an approval letter for a short sale, then you have probably applauded yourself for a job well done. Or, perhaps you and your colleague did a high five when the approval letter appeared in your email inbox or in the fax machine. Well, I’m here to tell you not to high five quite yet.
The first thing that you need to do when you receive a short sale approval letter is to read it very carefully. You may even need to send it to an attorney, escrow officer, or title company for review. I’ve seen hundreds (maybe even thousands) of short sale approval letters. And, I can tell you one thing for sure—many are filled with errors.
Here are some items that you should check in the approval letter:
- Buyer’s name. Is the correct buyer (or buyers) listed on the approval letter? Are all of the buyers listed on the approval letter?
- Seller’s name. Is the correct seller’s name listed on the approval letter? (Believe it or not, I’ve seen some approval letters come in with the name of another individual—not my seller).
- Closing date. Is the closing date logical and reasonable? (Don’t expect more than 45 days, but make sure the closing isn’t supposed to occur the day after tomorrow.)
- Correct net amount. Is the correct net amount listed—the amount that you submitted on the estimated settlement statement that you sent along with the short sale package?
- Funds allocated for all necessary expenses including other lien holders. Have funds been allocated for the second lien holder, the property taxes, and any of the other items that are required.
- Bank’s intentions with regard to deficiency balance. Legal liability issues are frequently mentioned in the short sale approval letter. This is where the bank will state whether they are waiving their right to pursue deficiency when applicable.
Does the approval letter smell like dead fish?
If the approval letter passes your sniff test, you will want to show it to the short sale seller so that he or she can take it to an attorney for review. However, if it stinks like dead fish or if you have found any errors in the approval letter, now is the time to go back and ask for the corrections. Additionally, if the bank will not agree to waive the deficiency balance, then some additional negotiating or strategizing may need to occur.
One thing is for certain: do not wait until you are about to close the deal to get all of the little errors squared away. Take care of the details as soon as possible. Then, when the deal finally closes, you can participate in the high five… or you can even go and hang ten.
Disclaimer: No fish were harmed in the writing of this post.
Photo: flickr creative commons by Tai Gray