Home Buying in Mobile>Question Details

TC88, Home Buyer in Grand Bay, AL

What does it mean when a listing says "subject to short sale approval"?

Asked by TC88, Grand Bay, AL Thu Jul 28, 2011

Our agent showed us a home that she told us was a short sale. Now, after we've put in an offer, I looked up the actual listing and it says "subject to short sale approval" I'm a little worried now. Does this mean an already complicated process is going to be even more difficult?

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Yes. An already complicated process is going to be even more difficult. Much, much more difficult.

It means the lender on the house you made an offer on has to approve your offer. That can take months. Sometimes a year or longer, though 3-6 months is more typical. And it means they can impose various other conditions. And maybe, after waiting 6 months, you'll be told that you have to close in a week or two, or the deal falls through.

The Realtor Code of Ethics doesn't allow me to criticize another Realtor. And, to your agent's credit, she did inform you that it was a short sale. But then she should have followed up with a simple, "Now do you understand what a short sale is?"

Good luck.
1 vote Thank Flag Link Fri Jul 29, 2011
Don Tepper, Real Estate Pro in Burke, VA
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First I'd like to say thank you all so much for your helpul answers! I should have came here first instead of spending hours googling! Lol! I heard back from our agent today and the owners accepted our offer. She said the listing agent was really on top of things so maybe he will keep things rolling at the bank. We aren't super rushed to get a house. We have a place to live in some family property but I still don't want it to take a year or anything!! :) We don't expect the bank to accept, I'm sure they will counter. But then at least we will have an idea of where they are pricewise. Both our agent and the listing agent say that short sales in the Mobile area have gotten much easier this year. Maybe someone else in this area can weigh in about that. It's worth a try I suppose! If it doesn't work out then there are plenty of other houses in that neighborhood we could look at.
0 votes Thank Flag Link Fri Jul 29, 2011
Ask your realtor to look into the situation, not all short sales are complicated. You can actually figure out which ones will be less complicated than others by doing your homework. This one might not be that bad, but have your realtor assess the situation to see what you're dealing with. On the flip side some short sales have no chance of being done at all. Screening the situation is the best approach before making an offer.
0 votes Thank Flag Link Fri Jul 29, 2011
TC88,

Just because you made an offer, even if at the listing price, and the offer was accepted by the seller, there is no guarantee that the lender will “approve” the transaction. That is the “subject to approval” issue and it is normal. The lender will review your offer, the seller’s hardship and will put a valuation on the house. The lender will take a lot longer to do that then it took me to write that sentence. If the lender decides all of the elements are in alignment, an approval will be granted. If not, you most likely will get a counter offer from the lender.

Only then with you proceed with your loan approval, appraisal inspections and everything else that goes into closing your purchase.

This is just a brief description of what is normally a long process.

Many buyers do not have the patience for a short sale purchase. Others find that it can be worth their while.

Good luck to you.
0 votes Thank Flag Link Fri Jul 29, 2011
She did tell us what a short sale was and warned us about all the "worst case secnario" type stuff. It was the whole 'pending approval' that threw us off. The listing agent also shared his experiences. We decided we had nothing to lose by making an offer. If they don't respond by a certain date then our contract is void and we will take it as a sign and move on. We were prepared for at least a three month wait. We've been told that is typical for that area and that they are becomng easier to do. And since there was only one lender on the home we were optimistic. But then after seeing "short sale pending approval".......maybe not so much.
0 votes Thank Flag Link Fri Jul 29, 2011
I am hoping that your Agent explained what you were getting in to:
Some people are hesitant to tell you all the bad things that could happen; "The Wrost Case Senario"!
You need your eyes wide open and your PATIENCE in fifth gear (or should that be FIRST gear?)

Good luck and may God bless
0 votes Thank Flag Link Fri Jul 29, 2011
Subject to Short Sale and Short Sale Approved are different. Sometimes the MLS listing may not have been updated and your agent did check beforehand to confirm it was already an approved short sell by the bank. If it is indeed, not approved, and subject to approval, than the process may take longer for the bank to respond to your offer. It can be a frustrating process because you are at the mercy of the banks response time. I'm sure your realtor will keep you informed during the process and you will soon have good news from the bank about your home.
0 votes Thank Flag Link Thu Jul 28, 2011
Short sales usually take quite a bit longer to reach closing. I have had a short sale close in as little as 30 days. A lot depends on what mortgage company holds the current mortgage. I have had much faster progress with a local lender over a national one. Also, the listing agent makes all the difference in the world! If they stay on top of things daily, the process usually goes much smoother. The longest delay is usually from waiting to get a response from the bank after the seller accepts your offer. It is not uncommon to have to wait several months to get a response.

If you have the time to be patient, you could walk away with a great deal.

Good luck.
0 votes Thank Flag Link Thu Jul 28, 2011
I believe it just means that the sale is subject to approval by the bank that currently holds the mortgage. I don't think it will be any more complicated than that. The seller will have to prove to the bank that he cannot afford to pay the mortgage and if he does the bank will approve the sale and take a loss. It takes time but if you are patient and reasonable you should be fine.
0 votes Thank Flag Link Thu Jul 28, 2011
No, Toni, it was always going to be that difficult.

For those readers who don't understand, a short sale, by definition, requires the approval of the seller's lender to accept a lower payoff than they're due. So if they owe $200,000 and the sale would only pay off $175,000 of that, the lender would have to agree to accept that, remove their lien from the property, and allow new buyers to start over.

Of course, you can have a situation where the seller owes more than they're going to net, but they can afford to write a check to pay it off, much like you might do when you trade-in a car.

All the best,
0 votes Thank Flag Link Thu Jul 28, 2011
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