The Ruse of Pre-Approved Short Sales
I see this in the agent remarks of the MLS listings all the time: ”Pre-approved short sale, quick closing possible”. It frustrates me when I see this and I have real distrust of that language or even the experience of the agent writing it. I have been on the buying side of several of these “pre-approved” short sales and trust me, they don’t happen much quicker than any other short sales.
I think many inexperienced Minnesota short sale agents put this on their listings just as a marketing trick. But, just to be certain, I polled a couple other experienced short sale agents on the Minnesota Real Estate team. Most don’t put it on their listings always, but most admitted that if everything lines up, you can have a quick short sale (relatively).
Lets review: Typically a Minnesota short sale can take 60-120 days to complete. There are endless variables and pot holes in the road that can slow down the process. Remember that the process of discussing the short sale with the bank(s) only begins once we get an offer on the property. You may have your home listed for months, but nothing is moving the short sale forward. If your agent is doing his job correctly, you should be making bi-weekly price decreases until you get more showings and eventually an offer. At that point, short sale package is submitted to your bank. This is day 1 of 60-120 days to get this home closed.
So what does a “Pre-Approved Short Sale” look like? Let’s assume for a second that this agent knows what they are doing. These types of sales can (not always, depending upon the bank) work if there was a previous offer submitted to the bank on this home. It is like priming the pump. The previous buyer went through some, most, or all of the 60-120 short sale and then backed out or for some reason the deal fell apart. If the short sale agent is smart, he will work quickly to secure another buyer (or better yet, he already had backup offers). You submit that 2nd offer and beg the bank to keep the file open and/or to just start from where they left off. Some banks will, others wont. Thankfully, some banks are not putting you back to day 1, but they will alternatively commit to approving a new buyer in a relatively short time.
Here is the caveat: In order to give the 2nd offer the best chance in moving quickly, it should equal the original offer that was submitted in the short sale package. The bank (in a simplistic way) looks at the 2nd offer as just a name change. If the 2nd offer is lower than the first, then you most likely (but not always, depending upon the bank) will need to start back at day 1. When I say the 2nd offer should equal the 1st offer, I am referring to all the parts, not just the price. Don’t let the new buyer add any personal property or other language outside of what the experienced short sale agent knows will be approved.
So the next time you see a “pre-approved short sale”, get excited that it may be quicker, but ask the listing agent why they believe this and use the above information to validate if that agent is a rock star or a newbie.
I think so many agents get to the BPO price, here the bank will accept 95% of the BPO price and automatically assume they will get approved asap. crazy thinking.
I disagree with this entire article–if the bank’s loss mitigator has already arrived at a number and shared it, it is viable to consider it “pre-approved.” I have acquired multiple properties in multiple states, both REO and short sale, and if you know the right questions to ask the listing agent, you can quickly discern your ability to close quickly and at your expected price. I recently purchased a short sale in Woodbury that went from offer to closing in 20 days, and it was a mortgaged purchase, not a cash deal. It wasn’t easy and took vigilence to ensure closing happened on time, but it can be done if the loss mitigator has already assessed the risk and arrived at a number. I was able to close at 80% of FMV simply because the loss mitigator didn’t want to absorb the costs of foreclosure.