Secure a buyer and get your short sale listing under contract!

So you have an offer for your short sale listing! 

Here is where the confusion often begins. Many uninformed agents believe that the lender is a principal in the transaction or they have some responsibility to the lender, but you in fact do not have any responsibility or fiduciary duty to the lender except for practicing basic honesty. 

The short sale approval is simply a contingency in the contract that must be met in order to complete the sale. 

Your fiduciary duty is always and only to the seller - your contracted client. 

Evaluate the offer:

Price is important, but not the most important item. You want your seller to accept an offer that has the highest odds of approval and successful closing. 

Your seller has nothing to gain from a higher price as they won't see any of it anyway. The lender will have an appraisal of this property as part of the short sale approval process which will come in at or close to your own estimation of market value. The sale price of the property will need to be relatively close to that number to get the short sale approval, but outside of that, more money is meaningless to your client.

So outside of a reasonable price you are looking for:

• The buyer and their agent to understand that they will be waiting for the approval for at least 60-90 days ( that short sale rider we mentioned earlier should also spell this, and all the following conditions out). There is no way to bypass this timeline and it may become longer so a buyer with a flexible timeline is best.
• The buyer to be willing to inspect the property shortly after contract acceptance by the seller. You absolutely cannot wait until after the approval process to have property inspections, for multiple reasons that are detrimental to the sale and the seller (I will detail this more fully in a later piece).
• Proper financing for the condition of the property and timeline of closing. Some loans simply cannot be processed in the short timeline the short sale approval letter will give the parties to close.
• Willingness of buyer's lender to start processing the loan before approval. Sometimes the buyers lender will simply sit on the file for months and wait for the short sale approval letter to arrive before doing anything. This won't bode well for a quick closing time frame upon receipt of the approval letter. The buyer and their lender will need to start doing some legwork on the loan while you process the short sale. I usually don't have a problem with the buyer not completing appraisal until after the approval letter, but most everything else should be completed by the time the approval letter arrives, or you will face timing challenges.

Have the seller sign the contract.

If the proposed sale meets the above conditions, you can move forward to having the seller sign the contract, including a condition of being subject to lien-holder approval. If the buyer is not agreeable to the above terms, it's best to keep moving on and find a more appropriate buyer.

Once a buyer is secured, a short sale under contract is no different than a traditional sale under contract. There is simply an additional contingency in the sale. This means your seller cannot legally enter into other contracts, even if a better offer shows up.