Karla, Home Buyer in San Diego, CA

What does it mean bank approved short sale?

Asked by Karla, San Diego, CA Thu Jan 29, 2009

Can I make an offer lower than 54,900

This question is about this property: http://www.trulia.com/property/1069018271-25-Del-Brienza-Lak…

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Jane Grant, Agent, Aguanga, CA
Thu Jan 29, 2009
An approved short sale is when the bank has agreed to accept less for a property than what is owed to pay off the loan. Why do banks agree to sell a property for less than the original loan? Because the original borrower is in default, (cannot pay their loan and is usually behind in payments). The bank does not want to own the home but knows that due to current market conditions they cannot get enough money for the home to pay off the original owners debt.

Title is still in the seller's name, until the full foreclosure process is over, NOD, notice of defaults have to be filed and a whole specific "Foreclosure", process begins when the bank realizes that the seller stops making payments. (I did not bother going into the whole foreclosure process with Brenda, at this point).

Other things to know!

A seller is usually already behind in payments
Seller has a specific legal timeframe, 120 days minimum to "cure" the default and stop the foreclosure process so they can keep the house.
Seller or seller's agent must contact the loss mitigation department of their bank and comply with all of the paperwork, such as submitting their w-2 forms from employers, tax returns, and a hardship letter stating why they cannot make the payments, such as unemployment.
Banks will do broker price opinions to determine the current value of the property
The bank has to accept the whole package including the offer from the new buyer and the current owners situation and reason for selling and inability to keep the house and pay the loan
This whole process which can be more complicated than I am outlining by 2nd and 3rd lien holders, lines of credit , property taxes due or past due, mechanics liens, IRS liens, is a long drawn out process that does not happen quickly and requires patience.

When the bank accepts less for a property than what is owed to pay off the loan. The property has not gone through the complete foreclosure process and is still owned by the borrower. Since the title is in the borrower's name and the borrower has a legal timeframe of a minimum of 120 days, longer if the borrower seeks legal action against the lending institution, the borrower can decide to "cure", the debt by either securing a hard money loan to pay off the lender who is going to foreclose or get help from family to pay off the debt and keep the property. Another complexity involving a short sale is that there can be two or even three lenders, holding 2nd and 3rd trust deeds that also need to agree with the short sale amount.


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1 vote
Tara Steinke, Agent, San Diego, CA
Thu Jan 29, 2009
Hi K,

Alan is correct in that a short sale is the bank accepting a "short pay" on the loan; meaning that the home is not worth as much as what is owed and the bank agrees to eat the difference. When a listing says "bank approved short sale" this means that the bank has already determined and communicated the price for a property with which they are willing to move forward on a short sale. Typically bank approval is received because the seller (current owner) has already submitted an offer with a short pay hardship package. When that first buyer walks from the transaction it can then be re-listed in the MLS with the statement that the short sale has already been bank approved. Obtaining bank approval is the most difficult and time consuming part of working through a short sale purchase so when a listing indicates its already been received that's a very good thing.

I hope this helps!! If you do not have an agent, let me know. I am an experienced buyer's specialist and am here to help.

Best of luck!

Tara Steinke
San Diego Real Estate Specialist
Residential Sales and Appraisal
1 vote
What happen when a bank approved short sale and did not closed on time but ask for extension, then bank say by the way the investor will not accept the approved priced. That was last year (2013) now they are dragging us in limbo, bank ask foe new appraisal also did their BPO but still want price above their own BPO. I don't understand why they are doing this.
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Kimberly Sel…, , Escondido, CA
Thu Jan 29, 2009
Hi! This means that the Agent turned in a HUD to the bank. This is a package that includes information about the house, the current loan and what the Agent believes the property can sell for. The bank then approves it or not. So, if the asking price is $200,000, then the bank approved that amount making it easier to go through the buying process. However, just because the bank approved that amount, do not offer what they are asking. You always have negotiating power!!! ;-)
0 votes
Eric H. Wong , Agent, Albany, CA
Thu Jan 29, 2009
Hi K;
Short Sales often take 3 to 4 months to close. A good portion of this time is taken by the bank waiting to assign a negotiator, and arriving at a price they will take for the property.
When you have a short sale on the market, and the bank has already approved the price they are willing to take on the property, this can cut out a huge amount of time from the transaction.

Good Luck
0 votes
Alan and Sus…, Agent, New City, NY
Thu Jan 29, 2009
A short sale is the term for when a homeowner owes more than the home is worth. A short sale specialist will negotiate with the mortgage holder (the bank) to reduce what they will take to satisfy the retirement of the mortgage. So when a short sale seller and buyer agree on a sales price, it is subject to bank approval.
0 votes
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