A seller whom I interviewed listed with another agent. Previously, the seller and I spoke, I asked for approval to speak to the bank and get the preapproval process started. She didn't want to get the bank involved. I think the agent is listing the house and waiting to get the offer without preapproval from the bank and then presenting the short sale to the bank. Is that normal?
In my view there is no pre approval for a short sale. All borrowers can be reviewed for a short sale. The question is not will a borrower be reviewed but will they be approved based on borrower financials and investor guidelines. The bank will need to get involved and the concept of not getting the bank involved does not make any sense, I'd be curious to know why the borrower stated that. It appears they would need to be educated on how a short sale really works.
Now not analyzing the situation and doing research with the bank before getting an offer is a poor move, but advising the bank a short sale is going to occur generally means nothing. The notification of intent to short sale is done by submitting appropriate documentation and triggering the review.