Q: Some of the listings in the MLS have a note in the agent comments that says, “This is a preapproved short sale.” Can a short sale really be preapproved?
Rick in Tacoma, WA
A: Beware of a listing that’s labeled “preapproved short sale”. Most lenders restart the transaction process for each new offer, so just because they approve the price on a property one time does not mean that same price is automatically preapproved for future offers. Even if the lender is one of the exceptions, investors generally require a property to be revalued every 90 days. If it’s past that three month window, you can be fairly sure that the process will need to start from scratch. Here’s an example of how lender short sale approvals work.
Let’s say Bank of America is the lender for your short sale listing. You get an offer from a buyer for $250,000 in March, submit all the paperwork to the bank, they do a BPO and they approve the offer. Then the buyer backs out – maybe there’s a problem that comes up at inspection or they don’t qualify for lending. You put the property back on the market in May, and a month later get an offer for $275,000. By now the home has been on the market for over 90 days, and the bank wants a current value, so they order a new BPO or appraisal. Once they take that step any prior approval is void. BofA has recently instituted a new policy where a new buyer can step into the existing process, and they will honor the current home value as long as it is still within the 90 day window. Even in the case of the HAFA program, which does the BPO upfront prior to the home being listed, the home is revalued if there’s been more than 90 days between the initial BPO and an offer.
Have a question of your own? Call 206-612-5541 or email firstname.lastname@example.org for free advice about your short sale.