More on Short Sale Approval Letters: What Sellers Must Know

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When I was in college, I took a sociology class that was taught by a professor who specialized in studying the impact of the media and its presentation of the news on the public. For example, he would study the number of copycat killers there might be after a murder was featured on the news. Not to be all gloom and doom, but I have noticed this same effect in real estate.

When the media talks about Obama’s HAMP loan modification program, Broadpoint Properties gets all sorts of calls about loan modifications. When the media talks about short sales, we get all sorts of calls about short sales.

This past week, I have had several short sale sellers call for more information on liability and deficiency judgments with regard to short sales. So, apparently, there has been an increase in discussion of this topic on television, on the Internet, or in print.

One question that I was asked about is how I can prove that when I negotiate a short sale, I always request that the bank specifically state that they will release the seller from any future obligation for the forgiven debt. As agents negotiating short sales, it is always our goal to obtain a full release of any future liability. Ultimately, the bank (if they approve the short sale) generates an approval letter which dictates the terms and conditions of the short sale approval.

Usually this approval letter will include the purchase price, the buyer and seller names, and the fees that the bank is willing to pay at closing (i.e., title insurance, real estate commission, etc.)

The short sale approval letter should carefully be reviewed by the borrower and an attorney selected by the borrower. Borrowers (short sale sellers) need to be sure that the language in the short sale approval letter represents a negotiation that is in their best interest. Most Realtors® are not attorneys, so it is vital to consult with an attorney on this matter prior to the closing of the transaction.

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