I was just wondering once you receive an approval on a short sale if you share the approval letter with the other party? Is it okay to share the letter with the sellers personal information with the other party to the transaction?
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Have the sellers sign it and let them know that it will be submitted to the buyers agent and to the closing attorney to confirm approval.
Hi Michele,
Our standard regional Realtor contract (Washington, D.C., Maryland almost to to Baltimore, Vrginia suburbs halfway to Richmond, part of West Virginia, and a nick of Pennsylvania) has a short sale contingency addendum that requires the seller to provide the approval letter to the buyer. Seller must also notify buyer immediately if bank rejects offer. All the timelines including home inspection, appraisal, and closing date are geared to the date that the seller provides the approval letter to the buyer.
It is a sensible way to do business. As a buyer agent, I've been told repeatedly by listing agents that the short sale got approval, but the letter doesn't show up for many weeks later. Sellers also have all the terms imposed by their lender in writing. Our addendum says that the seller may drop out of the deal if the letter doesn't offer full satisfaction of the seller's obligation or if a promissary note or cash contribution is required.
If you contract doesn't have such a provision, you ought to write a similar addendum with your offers or counteroffers. It is good for the buyer and seller and provides standard process for messy short sale transactions.
In the Chase approval there is form(s) that needs all the signatures of buyer(1), buyer(2), buyer(3), buyer(4), and seller(1), seller(2), seller(3), seller(4), and Listing Agent, Buyer Agent. ALL person involved must sign the Dodd Frank form. So how are you going to tell the buyer(s) to sign without showing them the approval? you can not ask them to blindly sign and they will question why & what are they signing. Disclosures is very important, there is nothing to hide. The lender is making the decision for approval and incentives and not you or the buyer or seller. What the lender pay or not pay is up to the lender not buyer or seller. Everything has to be transparent and upfront! Have buyer(s) fill out their part, sign and send to you. Then the other agent that represent the buyer(s) fill out their part. Then have your seller(s) fill their part, you fill out and send to the lender. The seller and you are the last one to fill out so the only thing the buyer(s) see is the Chase loan # of the seller which the seller will not own anymore after the closing anyway.
Although the newest SS addendum in AZ doesn't require it, I do share the approval letter (with Seller's personal info and loan number redacted) with the Buyer's agent. It puts everyone at ease to see it, sometimes the Buyer's lender requires it and there is simply no reason to be clandestine and not share it. We're all in this together!
Yes, the buyer's lender almost always requires a copy of the approval letter so that they know the liens are going to be released and there will be clear title.
The only information that could be deemed personal is how much is being forgiven (in California we are no deficiency).
Sharing the approval letter (which nominates the Buyer and discloses short sale approval NET and terms) is often "conditioned" by the Buyer's lender or their investor. Since I work with Buyers as well, I would insist on this too. Just part of the process.
I think the answer depends on how real estate transactions are conducted in certain states.
I am licensed in DC, VA, MD. I didn't used to provide it because it contained private information. But nowadays, we have to provide it to the buyer through the agent because its in our contracts that we have to provide the buyer written proof of bank approval. So I don't know of any other way to provide that written proof other than sending them the letter. Additionally, the buyer's lender now requires it to start loan processing.
I am a Realtor in Florida. Per the short sale addendum I use the offer is contingent on the sellers receiving a short sale approval with no deficiency. The effective date is when the buyers receive a copy of the short sale approval letter. The seller has 3 days from receipt of receiving the short sale approval letter to get it to the buyers. As the contract is contingent on the sellers receiving an approval with no deficiency it seems important that the buyers receive a copy to review.
I was trying to buy a short sale myself last Fall. This was to be my own personal home. It was listed by another agent that used a title company to negotiate. I was now the buyer and the negotiator from the title company felt it was not appropriate to discuss the case case. I was told that the short sale was close to being approved and that I needed to get things started as they didn't have much time . I had the home inspection, wind mitigation,paid for the survey and was told I needed to lock my rate in. I did it all and then got a text message. Sorry, the sellers' attorney filed bankrupcey. If I could wait while he tried to pull the house out it might be a month. I told them I was done and bought another home.
Bottom line on a short sale the buyer needs to know what is going on. I keep constant contact with all parties via emails on the process I make with t he banks.
We reserve the right to just issue a letter stating that short sale is approved. However, if the buyer is financed, many lenders require it before moving forward. If we supply to an outside party, we block out private information.We also do not provide the approval to the buyer until the seller has accepted the approval which is still an FTC requirement that they be able to reject the approval.
The short sale addendum used with contracts in the Washington, D. C. metro area requires the seller to provide the written approval letter to the buyer as soon as it is received. Addendum also requires seller to notify buyer immediately if short sale is rejected by seller's bank.
All contingency timelines start from the time that the buyer gets a copy of the approval letter. You might want to include similar language if you are a buyer agent and your standard contract doesn't include such language (provided you are in a state that allows agents to handle contracts).
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