Short sale question: Have PSA that states must close in 35 days. Have approval letter from bank for a week after that 35 day mark.

Asked by AJ Allen, Seattle, WA Tue Nov 20, 2012

Can the seller back out of the contract after the 35 days or do they have to wait for the expiration of the bank approval? the selling agent keeps pushing the importance of closing before the 35 days regardless of the approval date of the bank.

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Nancy Robins…, Agent, Royal Oak, MI
Sun Dec 2, 2012
These are the disclosuers that a Realtor must make in communications with prospective customers. Taken from the MARS rules. in short any seller can back out of a short sale at any time.

The Rule requires additional disclosures in any "consumer-specific commercial communication" – that is, a letter, phone call, email, text, or the like, directed at a specific person you're soliciting for your service. In every communication you have with prospective customers, the Rule requires that you clearly and prominently disclose three key facts, in these words:
1."You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [insert amount or method for calculating the amount] for our services."
2."[Name of your company] is not associated with the government, and our service is not approved by the government or your lender;" and
3."Even if you accept this offer and use our service, your lender may not agree to change your loan."

The three disclosures must be presented together. The Rule has specific requirements for presenting these disclosures to prospective customers.

My Board does not interpret the phrase "any time" to mean anything other than "any time."
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Maria Cipoll…, Agent, Coral Springs, FL
Sun Dec 2, 2012
Thirty five days is enough time to close on a property. The selling agent wants to close this short sale as soon as possible because the Bank may not give an extension. The approval letter that you have is nothing to do with the Bank desires to close this deal on thirty five days or before.

Best of Luck,

Maria Cipollone

Century 21 Tenace
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Jennifer Oha…, Agent, Bothell, WA
Tue Nov 20, 2012
The reason that the broker is pushing for you to close by the 35 days is because your contract expires on the 35th day. If you fail to close by then, the cotract is terminated and the seller can possibly (depending on if you waived it) keep your earnest money. If you fail to close by the 35th day, the seller could agree to extend the contract another week BUT they aren't required to. It doesn't matter that you have an approval that expires the week after. The approval letter should say that you have to close "BY such and such date".

Bottom line: In your case the short sale approval date doesn't matter. Even if you have the short sale approval letter, you can't close on a short sale if you don't have a valid contract. You need to close by the earlier date in the PSA.
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Karen Mcknig…, Agent, Kirkland, WA
Tue Nov 20, 2012
Hi AJ,

Based on what you wrote (and there may be other factors I'm not aware of), the purchase and sale agreement (PSA) is your contract with the seller. The PSA should have been written to close within 30 or 60 days of lienholder approval, but that is in the past.

For the present, you have a combination of options:
1) If you need the extra time, have your agent negotiate a specific closing date by presenting your addendum to the seller. The seller is not going to want to start over and get a new short sale approval. The short sale is specifically approved with you as the buyer. Also, be aware, if the date in the contract passes, the contract is void unless it is reinstated with an addendum agreeing to a new closing date.

2) Talk with the lienholdr's negotiator and see if you can close earlier. Usually the date in the lienholder's approval letter is a deadline, an outside date.

3) If your loan is not approved, talk to your lender and get your loan approved ASAP. There are lender's in today's market that can get loans approved in 10 days if they absolutely have to. If you need that resource, you can contact me at http .

Good luck,
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Pamela Bowe, Agent, Seattle, WA
Tue Nov 20, 2012
Lots of good advice so far. Let me add it is always important to rely on the support of your broker. As you are discovering, the world of Short Sales is indeed complicated, at best.
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Jirius Isaac, Agent, Kenmore, WA
Tue Nov 20, 2012
AJ. what are you up to???
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I don't know who that AJ is, however, I am doing great. How are you doing?
Flag Tue Nov 27, 2012
Alain Picard, Agent, Puyallup, WA
Tue Nov 20, 2012
If the PSA states closing is to be 35 days from notice of lenders consent and you aren't going to be able to close by that time then before 35 days have passed you would need to get an extension on your closing date signed by everyone. The date that the sellers lender wants the transaction to close by won't extend the closing date on your PSA by itself.
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Thanks, the selling agent does not want to do an extension to the PSA, if they don’t though this deal will fail and the property will foreclose (property has an auction date the first of the year).
Flag Tue Nov 20, 2012
Kary Krismer, Agent, Renton, WA
Tue Nov 20, 2012
This question isn't making sense to me. How could you possibly close before bank approval on a short sale? I would also question why you would have a short sale contract which required a close within 35 days. Even assuming a cash buyer, that would be a pretty short time frame.

But to answer your question, the seller cannot back out until a certain date has passed. Seemingly the way you phrased the question that would be the earlier of the closing date or the bank approval deadline, and that would be the closing date, but without seeing the contract that would be impossible to answer. For example, it's possible the contract really reads that closing would be within 35 days of bank approval. That would make more sense.

What you really need to do is have an attorney review your contract so that you can get a proper answer for your situation and your contract.
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Puneet Sachd…, Agent, Bellevue, WA
Tue Nov 20, 2012
They can legally back out if they want after the 35 days because of your contract.. Although in most cases they probably will let you extend upto the bank approval date. I would try your best to close in time.. Good luck!
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Marcy Spieker, Agent, Seattle, WA
Tue Nov 20, 2012
The seller can back out any time prior to the NWMLS Form 90SS being issued. That is the form that notifies the buyer that the seller either accepts or declines the approval terms the bank has offered (or gives notice of no bank approval). After the 90SS is delivered it is difficult for the seller to not perform. The 90SS is the official notice of lender approval (or not) and the 35 day time frame to close starts at the time of delivery.
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Chris Loelig…, Agent, Redmond, WA
Tue Nov 20, 2012
I haven't seen your contract and every contract has its own intricacies. But, in general, based on the contracts written up on NWMLS forms here in the Seattle area, a seller can almost never 'back out' of a deal. The contract states that it must close within 35 days. The bank is essentially giving one more week of leeway in case there are any last minute delays that take a day or two.

If the buyer or seller fails to perform and does not close the deal within the 35 day period as specified on the contract, then it is not a case of 'backing out.' The situation is that the contract is now failed (i don't know what the real legal term is) but the buyer and seller did not perform to the contract. So, it's done. That contract is thrown out the window and you move on. The additional week the bank is allowing has nothing to do with this situation unless the buyer and seller agree in writing to extend the closing date beyond the 35 days.

If the buyer and seller agree to extend the close 2-3 weeks more, even beyond the 1 week granted by the bank, that is fine. They can do that. It is still a binding contract between buyer and seller. But, they now longer have the bank's approval and the bank may refuse to remove the lien from the property which would prevent the property being transferred to the new buyer. They would have to get the bank to approve the extended close time frame. This happens regularly.

So, yes, the selling agent is right to push to close within the 35 day period or you have failed to perform to the contract. The bank's approval date is meaningless with regards to the contract that the buyer and seller have signed with each other.
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