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Understanding a short sale approval letter is a critical skill for a real estate agent, homeowner selling on a short sale, investor buying on a short sale, and anyone affected by a particular short sale transaction.

Most banks approving short sales are national.  This means they have loans in most states.  However, they often have legal council for the states they have loans in.  Because of this, often they will adjust their short sale approvals based on what works on the state were the property collateral to the loan is located.

This subject can get real technical.  That would be outside the scope of this blog post.  Lets focus on what the person selling on a short sale (homeowner) really want as first choice.  That is to not owe after the short sale. 

Just to not miss any components, there are three important concepts to understand.  Here I am simplifying to the maximum.

• Short Payoff:  The bank gets paid less than the total present value of the loan balance and releases its interest on the property.  So the property is no longer collateral.
• Release of Lien:  A type of short payoff in which, the shortfall between what is owed to the bank and obtained from the sale, is still owed by the homeowner.   Basically the homeowner still owes to the bank
• Short Sale:  A type of short payoff in which the homeowner does not owe anything to the bank after the property is sold. 

Needless to say, all homeowners want a short sale.  The question now is to know what is that the short sale letter actually means behind all that legalese wording.

How to Distinguish a Short Sale Approval Letter:

A short sale approval will always clearly state that the loan will be satisfied in full for less than the amount owed or very similar wording.  See sample below.

How to Distinguish a Release of Lien:

A release of lien letter will always indicate that the lien will be released but the debt will not be satisfied in full.  In addition, most likely, the homeowner will have to sign a promissory note at closing.

Oscar Morante
Ph:  971-222-3734
Fax: 866-844-7009
PDX Experts Real Estate, LLC
www.PDXExperts.com
534 SW 3rd Avenue
Suite 305
Portland, OR 97204

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Rock Realty Client Testimonials

"Approx 4 years ago.. I was having some financial strain. I wasn't able to keep up with a first and second mortgage alone as a single mom.

Through friends and family, I was introduced to Mike and Matt.

I didn't want to have to go through the foreclosure process, because I knew that I would be able to pull through the mess I was in within a few years and I didn't want to have that looming over me.

Matt and Mike were able to take over and help me with a short sale. They worked with me directly. They both came to my home, sat down, helped me understand this delicate process (which remains total Greek to me), and they were extremely efficient. My bank worked with me and these gentlemen, and withing approx 3 months, my home was sold in a short sale.

I remain amazed at their abilities and their continued efforts to help me.

Now, 3 years later, I'm looking to purchase... I have looked them up again... and they are helping me find a home that I'm looking for within my specifications and they also have resources to assist with lending.

Couldn't ask for more!!

Thanks so much my friends!! you do an awesome job... Keep up the great work!"

Kari B.(Cross Plains, WI)
Rock Realty Seller & Buyer Client

Thanks for the kind words Kari! We look forward to finding you the home perfect for you!

Hello. My clients completed a short sale w/ BOA in June 2010. The home had PMI & was an FHA loan.  They received their 1099C last week. They want to know when they can legally purchase a new home w/o worry that someone would come back after them. They're doing a lease to own on a new house from their parents, but for all practical purposes are acting like they own the property. Is now ok to transfer the home into their name or should they wait until 2012 so there's more period between the two? The parents are financing the new mortgage so there's no credit recovery required....

Thanks,
Maggie