Once the Short Sale has been approved, the lender will furnish a formal approval letter, and the contract can move forward. Exactly how that contract moves forward varies from State to State as do the contracts themselves.
Based in Dallas, we can only speak to Texas contracts. In Texas, the transaction typically closes within 30 days of Short Sale approval.
However, in Texas, the contract execution date is amended to reflect the Short Sale approval date. That means the buyer usually does not have the property inspected or appraised until after the Short Sale has been approved by the lender. It would be senseless for the buyer to spend money for those services before even knowing if the Short Sale will be approved.
In Texas, the buyer often has an Option Period (usually 7 – 10 days) in which to have the house inspected. Regardless of what the inspection reveals, the buyer can terminate the contract during the Option Period at no cost other than a small Option Fee.
In regards to the inspection, homeowners in a Short Sale situation typically don’t have the money to make repairs. The lender is unlikely to pay for repairs either given the loss they’re already taking. The exception to this could be a major repair that the buyer’s lender requires in order to approve the loan – foundation, roof, heat and A/C for example.
It can be very disconcerting for the homeowner and all parties involved to endure this lengthy process only to have a potential buyer walk away at the last minute. This doesn’t happen often, but if it does, there is some good news. The Short Sale package (and sales price) has already been approved by the lender, so all that’s needed is a new buyer and a new purchase contract.
Most times, once Short Sale approval is received, both the seller and buyer are excited to move the process forward to a successful closing. Homeowners are so emotionally involved, and understandably so, with their particular situations; they’re often unaware that some of the major lenders are completely inundated with Short Sale and foreclosure files.
We were “enlightened” by one of the country’s largest lenders that their Short Sale negotiators regularly have 1,000 files to work at any given point in time. Hence, another reason why Short Sales are anything but short!
We encourage homeowners across the United States to get educated on the options available should they become financially distressed. Short Sales are a great tool, providing relief to all parties.
Just remember to choose a REALTOR® with a proven Short Sale track record to negotiate on your behalf. Making the right choice can mean the world of difference to your financial future.
Based on The Field Guide to Short Sales. Copyright © 2010 by Tom Branch & Gina Branch.
