Short-Sale Approved! Now What?
August 20, 2009 by Danilo Bogdanovic
Filed under Short-Sales and Distressed Properties
Congratulations! You’ve waited patiently for a response on your short-sale offer from the bank(s) and you just got word that it’s been approved - half the battle has been won!
So now what?
To best understand what happens next, let’s quickly go over a part of the short-sale process…
The majority of what needs to be done (loan processing, appraisal, title work, termite, etc) can’t be done until the bank(s) has approved the short-sale - in writing. The reason for waiting until then is that all of those things cost money and no one wants to spend the money and resources before knowing for sure that the short-sale will be approved.
And as far as timing, you typically only have 2 to 4 weeks from when the short-sale has been approved to get all these things done because that’s how long the typical short-sale approval from the bank(s) is good for. If you run past the deadline, you have to ask for an extension and/or a new approval. While this is more than possible, it’s a hurdle best avoided if possible.
Is it tough to get all those things doe and settle within that time frame?
Two weeks is cutting it close, but four weeks is not a problem with the right lender on your side.
Now back to answering the question, “So now what?”…
Here are some things you can expect as a buyer once the short-sale approval comes in:
- Schedule the settlement date and closing time based on the short-sale approval deadline(s) and when the lender can have the loan done and ready for funding
- Provide your lender with updated pay stubs, bank statements, financial statements, etc.
- The lender will now order an appraisal on your behalf
- If you haven’t already done so, you should set up a home inspection (click here for more about home inspections on “as is” properties)
- Order the termite inspection (sometimes it’s the seller’s responsibility and sometimes it’s yours)
- The settlement/title company will now order the title search, title work, survey, etc.
- If you’re renting, now is the time to put in your notice to the landlord/management company
- Obtain home owner’s insurance on the new property
- Contact the moving company if you’re using one (or call your friends/family and start bribing them with favors now)
- Put in for time off from work for the final walk-through and settlement (these can only take place during normal business hours Monday through Friday)
- About 2 weeks out, but not less than 1 week out from settlement date, transfer the utilities into your name
See..not too bad at all! Short-sales are a “stop and go” process. But, as many short-sale sellers and buyers will tell you, it’s well worth it! The seller ends up avoiding foreclosure and an even bigger ding to their credit while the buyer gets a great deal on a new home.
***CLICK HERE TO SEE ALL ACTIVE SHORT SALES IN LOUDOUN COUNTY***
Thanks for the simple answer. I hae been searching for an an answer as to what happens after short sale approval and you explained it in simple terms. Thank you.
You’re welcome Veronica! Glad I could be of help.
Is is normal in a short sale for the bank to give approval then go to the lender for the approval letter?
Sharon - Sent you an email.
Excellent site. Plenty of useful information here. I am sending it to some buddies ans additionally sharing in delicious. And obviously, thanks in your sweat!
we heard 2 weeks ago that the bank approved our offer on a short sale. the sellers attorney said he was waiting for a checklist from the bank….wtf? we placed our bid on this house in AUGUST (its now April) it seems like every step takes at least 1 month…we have already secured finiancing, we have been updating that info, now we need to refresh our committment paper work with the bank, we have a appraisal done for our FHA loan, we ordered the CO…what else could they possible need on this checklist????
Naomi - Unfortunately, banks work at their own speed. And every bank is different and unique in how efficiently (or inefficiently) they handle their internal short-sale process. Hard to say why they’re taking so long without being privy to your transaction details. Which bank are you dealing with? Is there more than one bank involved?
Now I’m kinda panicked since I have heard it might be closed a lot sooner than we expected. Now I wonder if there is any way to extend the process
because we can not break the current lease?
Nothing you can do to slow a short-sale down. When a bank approves a short-sale, they typically give a 30 day deadline for closing or the short-sale approval is revoked. You need to speak with your Buyer’s Agent for guidance and possibly even a lawyer for legal advice.
My short sales has been approval by the bank and now my real estate agent wants 14,000.00 to be sent to the escrow account. This is a large sum and I don’t understand why? The inspection is due on Monday by an inspector she recommended. Is this normal?
Glen - I can not comment on your question about the $14K because I have no idea what your contract states or how it is structured. As far as the home inspector is concerned, you as the buyer/client have the right to choose whichever person/company you wish for the home inspection and all other inspections and third-party vendors. Since most consumers don’t have a home inspector they know personally and trust their agent, they go with the agent’s recommendation. Agents work with home inspectors regularly and should be able to give you the names of at least 3 good home inspectors/companies which you can then call individually and choose the one you wish to go with. If you don’t feel comfortable with any recommendation your agent gives you, you can always ask your friends, family or co-workers who they used for their home inspection when they bought their home.