Pre-Approved Short Sales and Pipe Dreams

By
Real Estate Broker/Owner with Broadpoint Properties Cal BRE #01324959

pre-approved short saleRumors, just like viruses, spread like wildfire. And, of course, since I reside in San Diego County, I have my own experiences with wildfire. Like wildfire, there were waves of rumors spread throughout 2011 about the pre-approved short sale.

Here’s are some James Joyce-style musings on pre-approved short sales: 

Often times, pre-approved means that the bank now rules the roost. The bank can dictate terms (including commission), and can also request that the terms and conditions for marketing the property (including the number of open houses required).

Another challenge of the pre-approved short sale is that the bank(s) may not approve of certain types of buyers (such as corporate entities or limited partnerships). Of course, this is wildly ironic since it is the seller who owns the property and accepts the purchase agreement, while the bank merely ratifies the sale. 

When I hear agents at caravan pitch their homes as approved short sales, I know that there is more to the equation. Yes, there was a time when you could substitute a short sale buyer at the same terms and conditions and get a new short sale approval letter in a day or two, but these times are getting fewer and further between. With Equator (and Bank of America), you can request a soft decline and the next buyer’s offer is processed more quickly—but the same terms and conditions may not be accepted by the bank.

The HAFA program (Home Affordable Foreclosure Alternatives) does offer two different mechanisms—one of which includes submitting a package without an offer and waiting for a pre-approved purchase price. Many short sale aficionados do not care for this kind of pre-approved short sale. These agents have noted that the process (and the processing) is exceedingly slow and the approved prices are often not in line with existing market values. 

Bank of America also has a Cooperative Short Sale Program, which offers a pre-approved short sale. Coming up on its first anniversary, this program was said to offer approvals and pre-approvals in record time. Yet, the program seems plagued by the very same problems as the HAFA program (slow processing times, dictated and inflexible terms, an exceedingly high list price).

While 2012 is definitely the year of the short sale, pre-approved short sales whereby a short sale is approved in a week or so (and you just have to find a buyer) are still just a pipe dream for short sale agents.

 

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  1. Roseanne Campagna 01/08/2012 02:31 PM
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Show All Comments
Rainmaker
138,414
Kimberly Tapscott
Keller Williams Prestige Properties - Stamford, CT
Giving you the service you deserve!
Great post. I used to see a lot of 'pre-approved short sale' put out there by naive agents thinking that they can use the amount for the deal that fell through with the new buyer....tst tst. I educated a couple by letting them know that each buyer is a different entity and the banks sees them as such. Your post takes out the vagueness . Thank you!
January 08, 2012 02:24 PM #1
Rainmaker
129,793
Roseanne Campagna
John L. Scott RE Maple Valley, WA - Kent, WA
Kent/DesMoines/Blk Diamond/Renton/Maple Valley, WA

Because of the market environment, it is no easy task to avoid working short sales with buyers who are looking for a home at a price that fits their budget. I have not been certified as a ss specialist and likely will not even though I have taken classes to get up to speed on things. My point is your posts have been most helpful and very informative and a thanks is in order - so thanks. I hope it will help towards smoother transactions.

January 08, 2012 02:29 PM #2
Rainmaker
133,587
Marcia Kramarz
Re/Max Executive Realty - Medway, MA
CDPE,LMC,CBR

always leraning from you, Melissa - thanks...

January 08, 2012 03:40 PM #3
Rainmaker
1,057,391
Ginny Gorman
Phillips Post Road Realty ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in North Kingstown RI and beyond

Melissa, i will forever bite my tongue is i ever say again pre-approved short sale!

January 08, 2012 04:44 PM #4
Rainmaker
799,343
David Spencer
Keller Williams Team Realty - Bloomingdale, IL
Chicago Area Commercial-Residential R.E.

It is like my buyer is pre-qualified. Means nothing.

January 08, 2012 05:53 PM #5
Rainmaker
856,741
Steve Loynd
Alpine Lakes Real Estate Inc., - Lincoln, NH
800-926-5653, White Mountains NH

Melissa, I avoid using the phases - Always  or never when it comes to short sales, as soon as you think there is a reasonable pattern something changes - and so does your negotiator, your paper work, your requirement...you get the picture.

January 08, 2012 07:18 PM #6
Ambassador
1,808,356
Jeff Dowler CRS
Solutions Real Estate - Carlsbad, CA
Carlsbad CA Homes for Sale (760) 840-1360

Melissa

There is always something new to learn about short sales, and the playing field is always changing. One can never make assumptions of any kind...clearly. And the challenges continue unabated. Thank goodness we have people liek you to help with education.

Jeff

January 08, 2012 11:03 PM #7
Rainmaker
908,726
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

I guess I have been fortunate enough not to see the type of pre-approved short sale you mention. Telling me when I am going to do an open house - YA RIGHT LOL!!

January 09, 2012 08:09 AM #8
Rainmaker
116,579
Harley Wilcox
West Group Real Estate - Victor, ID
Harley Wilcox

As goes the saying "The past does not always repeat itself". One thing for certain - change.

January 10, 2012 08:14 AM #9
Rainmaker
1,198,738
Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents
Lyon Real Estate - Sacramento, CA
Put 40 years of experience to work for you

There are so many different types of preapproved short sales, Melissa, it's very difficult for agents who don't work in that arena to know what it means. If a short sale is truly preapproved, such as certain types of HAFAs, for example, only the price is approved and you know that the seller's situation qualifies. However, the seller's situation can change and the price doesn't include always, for instance, a closing cost credit. There is no slam dunk.

January 10, 2012 10:55 AM #10
Rainmaker
1,231,936
Michelle Gibson
Hansen Real Estate Group Inc. - Wellington, FL
REALTOR

Melissa - I love receiving short sale approval, but an "approved short sale" can sometimes give false hope.

January 10, 2012 11:01 AM #11
Rainmaker
977,394
Michael J. Perry
RE/MAX Associates of Lancaster, PA. - Lancaster, PA
Lancaster Relo Specialist

A couple of years ago I had great hopes for the HAFA program, but it seems to be mired down !

January 12, 2012 08:34 AM #12
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Ambassador
1,090,578

Melissa Zavala

Broker, Escondido Real Estate, San Diego County
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