Home Buying in San Diego>Question Details

Mike, Home Buyer in San Diego County, CA

If the bank approves a short sale can the seller decline to sign the approval letter and let it foreclose?

Asked by Mike, San Diego County, CA Thu May 24, 2012

Help the community by answering this question:


They can..It's hard to imagine if they've done all the work for sa short sale, but I have seen it done.

The entire short sale transaction is 'subject to" the lender's approval. If the bank levies terms on the sellers that they don't want to comply with, they can walk.

I had this situation about a year ago. I represented the seller, and the bank would only approve a short sale if the seller contributed $35,000 to the table. Both teachers my sellers simply did not have that kind of money...our deal crashed and they foreclosed.

Yup - short sales are tricky buysiness!
1 vote Thank Flag Link Thu May 24, 2012
If the approval received requires the seller to bring funds into escrow or are different than the original contract, then yes......if there was a short sale addendum signed the seller does not have to move forward with the sale.


Seller shall reasonably cooperate with existing Short Sale Lenders in the short sale process, but neither Seller nor Buyer is obligated to change the terms of their Agreement to satisfy Short Sale Lenders’ consent or term sheet(s).

1 vote Thank Flag Link Thu May 24, 2012
Of course the seller can decline to sign the approval! In fact, they can decline to even do a short sale. The short sale process is just another option a home owner can perform to avoid foreclosure. It wouldn't make much sense considering their situation but I have seen short sales fall apart due to sellers throwing in the towel and becoming unreachable.
0 votes Thank Flag Link Tue Jun 19, 2012
Tis a crazy and confused world to say the least.
0 votes Thank Flag Link Thu Jun 14, 2012
@Semper Fi Homes

Why is the husband not getting his divorce attorney involved to force her to live up to the agreement to short sell the house? Was that not part of the divorce?
0 votes Thank Flag Link Thu Jun 14, 2012
I love all these answers!! I have been working a short sale now for many months. It is a divorce situation. Both parties were agreeable to the sale in the beginning but now wife doesn't want to disclose documents, is mad at ex husband.....decided to let it foreclose. Agents exhausted, buyers are frustrated, sellers get to have a foreclosure on their record.....She showed him. Its a crazy world :}
0 votes Thank Flag Link Wed Jun 13, 2012
Kevin Sanderlin’s opinion may or may not be correct. I don’t know. But would I do know is that I would not waste my time suing someone who has just lost their house to foreclosure. What would you expect to gain after you have paid all the costs of a lawsuit even if you got a judgment against the foreclosure victim?
0 votes Thank Flag Link Tue May 29, 2012
I suppose they could but why in the world would you want to ruin your credit? Most folks are seeking short sales in lieu of foreclosure. Not sure I'm totally getting the picture here.
0 votes Thank Flag Link Sat May 26, 2012
I'm probably being paranoid but I'm worried the seller is working the system. He is still living in the home (of course not paying anything). The short sale process is very lengthy. If he doesn't really care about his credit and is just trying to live in the house as longer as he can "mortgage free" then why not work the short sale process then let it go to foreclosure and work that for all it's worth too. Like I said I'm probably being paranoid.
Flag Sat May 26, 2012
Go to http://www.floridabuyerbroker.com and read the link on the left that says About MARS Disclosures. The federal government passed a law requiring disclosures to sellers regarding their rights in a short sale transaction. The National Association of REALTORS managed to get the Federal Government to put a "stay" on the law in regards to it applying to REALTORS, so they can not be prosecuted for not disclosing the MARS rules to a seller. However, I do believe that the seller in a short sale is still entitled to all the rights given to the seller by the law. At this time the short seller's agent it not required to disclosue to the seller in writing what their right are in a short sale. Hope you find the information helpful. Read your contract, it should have given you the right to cancel if you did not like the terms the lender came back with for their approval. It's always important to consult an attorney prior to entering into a short sale. Most real estate agents have you sign a statement saying they have advised a short seller to consult an accountant and an attorney prior to entering a short sale transaction. That is how a seller can find out the truth of the potential consequences of the short sale. In the State of Florida real estate agents can only make a commission if the short sale closes,. It is illegal for them to counsel a seller to help then stay in their home via grant money, refinancing or loan modification unless they are also a mortgage broker. Good Luck. Beverly Howe, ABR, GRI, TRC, CIPS Broker@FloridaBuyerBroker.com Learn more about Short Sales, Short Sale Fraud and MARS Short Sales law at http://www.floridabuyerbroker.com
0 votes Thank Flag Link Thu May 24, 2012
Shannon nailed it... the seller could always choose not to accept any of the conditions in the short sale approval letter as there are usually conditions not in the original contract.
0 votes Thank Flag Link Thu May 24, 2012
It depends on where you are in the process but it may not be in your best interest to let the house go into foreclosure. Best to discuss with a Realtor and Attorney
George Samuels
0 votes Thank Flag Link Thu May 24, 2012
If the short sale approval was received during the time frame specified in the Short Sale Addendum that should have been part of the offer and the terms of the short sale approval did not require the seller to bring in cash, then you have a valid contract. Otherwise the verbiage that Shannon quoted applies.
However if the seller will not perform and sign the escrow papers the transaction cannot proceed and by the time you go through legal action the property will probably be foreclosed on.
Good luck. Hopefully your Realtor will be able to solve this problem for you.
I am never too busy for your referrals

Jerry Heard
Your Broker
The San Diego Property Shop
Direct 619-920-9796
Office 619-269-5545
Fax 619-269-9168
CA DRE # 00648687
0 votes Thank Flag Link Thu May 24, 2012
Hi Mike,
Technically they could, but I don't see how it would be in their interest to do so. They would most likely be in violation of the contract as well. If you think this is a real possibility and you are going to suffer damages, I would contact a real estate attorney.

I hope you are being represented by an agent as well!

Sinead McAllister
McAllister Homes Real Estate
0 votes Thank Flag Link Thu May 24, 2012
From what I understand, if the approval letter matches the completed contract, the seller is obligated to sell the property to the buyer, and cannot back out. However, this is a good example of a situation that you would want to have an attorney review for the best answer. Mainly because if the seller did decline to sign and let it got to foreclosure, the seller could likely get sued by the buyer or even the buyer's broker.

Kevin Sanderlin
Keller Williams Realty
Cell 858-212-4702
0 votes Thank Flag Link Thu May 24, 2012
Most Assuredly!~
Your S/S Specialist!~
0 votes Thank Flag Link Thu May 24, 2012
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