What’s in a Short Sale Approval Letter

Real estate agents talk all the time about getting an “approval” or an “approval letter” on a short sale. But what does this approval letter actually contain?

Most obviously, the letter is going to say that either the lender will accept the purchase price or, more often, that the lender will accept a certain net proceeds based on the set purchase price and then adjusted for commissions, closing costs, etc.

If the buyer asked for help with closing costs, approval of this would appear in the approval letter (or not, if the lender isn’t going to pay the buyers’ closing costs. And if they’re not, that often requires a little extra negotiation between buyers agent and listing agent.)

Total commission to be paid is included in the approval letter and, sadly, still seems to be subject to the whim of the lender regardless of what is stated in the listing agreement.

Most importantly for the seller … fine print that can come back and bite the seller can be included in the approval letter. For instance, a seller would want to make sure there’s language that gives assurance the lender will not pursue the amount of the mortgage written off after the short sale is complete.

(Before you remind me that Arizona is an anti-deficiency state, that statute applies to actual foreclosures and not necessarily to a short sale.)

In other words, the approval letter while usually greeted with relief needs to be reviewed carefully to make sure there are no surprises. Hopefully, it will match what the lender and your real estate agent have discussed all along. But if you have any questions about what the letter actually says, if there’s anything that seems less than cut and dried, run the information past a real estate attorney for your own sake.

Image: Kittikun Atsawintarangkul / FreeDigitalPhotos.net

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.