Understanding Short Sale Approval Letters

A short sale approval letter is a document that a lender sends to a seller to give approval for a short sale, where the sale proceeds are less than the loan amount. This letter outlines the terms needed to release the lien on the property and close the sale.

How Short Sale Approval Letters Work

When a buyer makes an offer on a home being sold through a short sale, the buyer and seller negotiate the deal. The seller's agent then presents the deal to the lender with a "short sale package" containing the purchase contract and other relevant information.

Response from the Lender

The lender will analyze the short sale package and either approve or refuse the sale based on the terms. If approved, the lender issues a short sale approval letter outlining the terms, such as purchase price, closing date, and commission costs.

What's Included in a Short Sale Approval Letter

A short sale approval letter should include the sale price, net proceeds, allowable commissions, release of debt liability, closing costs, and closing date. Sellers should ensure the letter specifies a short sale to lessen the impact on credit.

Conclusion

Understanding and managing the terms in a short sale approval letter is crucial for a smooth process and future credit standing. It's essential to consult with a real estate lawyer if there are any concerns or uncertainties regarding the terms of the letter.