Wellington Florida Approved Short Sales, Do They Exist?

Wellington Florida Approved Short Sales, Do They Exist?

In the competitive and ever-evolving real estate market of Wellington Florida, some prospective buyers are wondering if approved short sales truly exist. If you are one of the many buyers looking to purchase a home, especially a short sale, you might have seen listings being advertised as an “approved short sale.” But what does this term mean, and how does it affect your homebuying process in Wellington? Let’s take a closer look at approved short sales along with a real-life example of an “approved short sale.”

Wellington FL Approved Short Sales, Do They Exist?

What is a Short Sale in Real Estate?

In real estate, a short sale is a transaction that occurs when a homeowner sells their property for an amount that is less than the outstanding mortgage balance on the property. This typically happens when the homeowner is facing financial difficulties and can no longer afford to make mortgage payments.

What is an Approved Short Sale in Real Estate?

An approved short sale in real estate is when the mortgage lender has agreed to accept the sale of a property for an amount that is less than the outstanding mortgage balance. In other words, the lender has given its approval for the property to be sold as a short sale.

Short Sale Approval Process

The short sale approval process is a pivotal and often intricate phase in real estate transactions, so understanding the nuances of this process is essential. Here’s how the short sale process typically works in a real estate transaction:

  1. Financial Distress: The homeowner experiences financial hardship, such as job loss, medical expenses, or a significant decrease in income, which makes it challenging to continue making mortgage payments.
  2. Listing the Property: Once a homeowner decides to sell the next step is to list their home for sale as a short sale.
  3. The Short Sale Process | Step-by-Step GuideBuyer’s Offer: Just like a traditional sale potential buyers will submit an offer and negotiate the terms with the seller. However, the accepted offer is subject to approval by both the seller and the lender.
  4. Short Sale Approval: The homeowner submits the executed contract to their mortgage lender, along with documentation proving their financial hardship often referred to as the hardship package. The lender reviews the offer and financial documents to determine if accepting the offer and forgiving part of the mortgage debt is more financially advantageous than going through the foreclosure process.
  5. Lender Decision: The lender can either approve the short sale, reject it, or make a counteroffer. If approved, the lender agrees to accept the proceeds from the sale as full or partial satisfaction of the mortgage debt, even if it is less than the outstanding balance.
  6. Closing the Sale: Once the short sale is approved, the clock starts ticking and it’s time for the buyer to perform. During this period they will usually make additional escrow deposits, have inspections and if they’re obtaining financing apply for a mortgage. The short sale lender generally gives the buyer 30-60 days to close the transaction. If they don’t the process may have to be started all over again.

Are Approved Short Sales Listed for Sale?

It’s not uncommon for buyers to see “approved” short sale listings in the MLS, but in that instance what does “approved” actually mean? Here’s a quick story about an approved short sale and what actually took place.

Storytime

I have a close acquaintance who is purchasing an “approved” short-sale home in another city and they are frustrated. To protect the innocent, I will call him “dad” from now on. Dad called me the other day, he was beyond frustrated and annoyed because the bank handling the “approved” short sale was taking their sweet little time. He’s ready to move and can’t understand why they can’t close ASAP on this “approved” short sale.

I had to explain several things to Dad about short sales that are “approved.” First things first, in what capacity was the short sale “approved”? Did the seller receive short sale approval with another buyer who walked? Does the seller have a hardship and think they’ll get approved without an issue? Did the bank approve the short sale price in advance? These questions then create more questions: Who’s the servicing company? Who’s the investor? How many liens are on the property? Are the HOA fees current? The list of questions can go on and on.

Surprisingly, none of the above matters because an “approved” short sale still needs to be approved for a specific buyer.

The Story About An "Approved" Short SaleEven if the Wellington Florida approved short sale seems like a “slam dunk” situation where Dad can waltz in, many things can still happen in the approval process for the new buyer:

  • HOA can go delinquent.
  • New liens may appear.
  • Vacant homes may experience vandalism, which can impact a buyer’s financing options.
  • The servicing company can order a new appraisal or BPO, which may come back with a price higher than the approved price.
  • The servicing company may not think this is an arm’s length transaction. Meaning the seller and buyer know or are related to one another.

So the next question is, how long will this re-approval take? Well, for the most part, it shouldn’t take several months, but it can easily take a solid month depending on how quickly everyone works and if there are no hiccups along the way.

One of the main problems with short sales is people might try to lie, so the banks want to make sure everything is above board and thoroughly go through the process. They want to make sure there is a valid hardship, solid pricing, arm’s length & so on. Every short sale situation is different, like a thumbprint, which is why it’s important to work with an agent who knows the ins and outs of a short sale.

Unfortunately, the only thing “short” about a short sale is the payoff amount.

Sorry, Dad.

Do Approved Short Sales Exist?

It’s unlikely an “approved” short sale exists where the buyer can go under contract and proceed to closing without the short sale lenders involvement. However, a “previously approved” short sale very well could exist, which indicates the short sale was previously approved with another buyer. Now, can the short sale lender approve a short sale prior to listing the home for sale? It’s been known to happen but it is extremely rare.

So it’s important for buyers who are pursuing an approved short sale to ask a lot of questions. Questions that “Dad” didn’t know any of the answers to. By knowing all of those it will help determine the likelihood of the short sale being approved and how quickly.

Final Thoughts

Short sales can be a complex and lengthy process, involving negotiations between the seller, buyer, and lender. They are a great way for homeowners to avoid foreclosure and the associated damage to their credit while allowing the lender to mitigate some of its losses but they can be lengthy. So it’s important for all parties to understand the process and set their expectations accordingly. This includes buyers buying a short sale and sellers selling their home as a short sale.

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About the Author

Top Wellington Realtor, Michelle Gibson, wrote: “Wellington Florida Approved Short Sales, Do They Exist?”

Michelle has been specializing in residential real estate since 2001 throughout Wellington Florida and the surrounding area. Whether you’re looking to buy, sell or rent she will guide you through the entire real estate transaction. If you’re ready to put Michelle’s knowledge and expertise to work for you call or e-mail her today.

Areas of service include WellingtonLake Worth, Royal Palm Beach, Boynton Beach, West Palm Beach, Loxahatchee, Greenacres, and more.

Wellington Florida Approved Short Sales, Do They Exist?

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Michelle Gibson Wellington Florida REALTORMichelle Gibson of the Hansen Real Estate Group Inc is a full-time REALTOR who has been specializing in Wellington Florida real estate since 2001. This veteran of the real estate industry has expertise in technology, marketing, and social media.

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