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“Lender approval required”
Q. I am a first time buyer and it seems to me that quite a few of the listings which I am interested in have the words “lender approval required.” My real estate agent has said it is no big deal, nothing to be concerned about. My gut tells me it must be important or they wouldn’t have it in there. Can you explain what those words mean to a potential buyer like myself?
A. First, we should thank God for guts. Our gut has a remarkable way of warning us when we are in danger, even when we can’t see it. You are absolutely correct to be concerned that the phrase must be important. It is. Either your agent does not understand the implications of the phrase (lots of agents do not) or is so worried about getting you to write an offer that he/she is willing to ignore their fiduciary responsibility to explain to you how a short sale purchase is dramatically different from a traditional listing.
”Lender approval required” means that the home cannot be sold until the lender who is holding the mortgage for the seller agrees to all the terms and conditions for the sale. Almost always the seller is in default and the home cannot be sold for as much as the amount owed. The lender must look at the seller’s finances, consider the current value of the property and lots of other things before they make a decision on any offer which may be presented. This process will typically take several MONTHS.
In the meantime, the seller may decide to file bankruptcy (home is then unavailable). Or the lender may speed through the process of foreclosure, which also means the home becomes unavailable. Or the borrower might decide to process a deed-in-lieu of foreclosure in order to avoid having a foreclosure on their record. A number of things could happen so there is no home to buy. Or the lender may not be able to agree to the amount that you wish to pay because the two of you cannot come to an agreement on the current value.
Most important, perhaps, is the uncertainty for an extended period of time until the lender is able to make a decision. Consider yourself warned—proceed with caution if these words are included in the listing of a home you especially like. There is no reason to avoid a short sale listing—as long as you know the real deal. Trust your gut—continue to consult with it as you move through your housing purchase
(Please e-mail Heather at homeownershipmatters@gmail.com with any questions, comments, or concerns you might have. We appreciate all feedback, comments, and especially your questions. Don't be shy!)
A. First, we should thank God for guts. Our gut has a remarkable way of warning us when we are in danger, even when we can’t see it. You are absolutely correct to be concerned that the phrase must be important. It is. Either your agent does not understand the implications of the phrase (lots of agents do not) or is so worried about getting you to write an offer that he/she is willing to ignore their fiduciary responsibility to explain to you how a short sale purchase is dramatically different from a traditional listing.
”Lender approval required” means that the home cannot be sold until the lender who is holding the mortgage for the seller agrees to all the terms and conditions for the sale. Almost always the seller is in default and the home cannot be sold for as much as the amount owed. The lender must look at the seller’s finances, consider the current value of the property and lots of other things before they make a decision on any offer which may be presented. This process will typically take several MONTHS.
In the meantime, the seller may decide to file bankruptcy (home is then unavailable). Or the lender may speed through the process of foreclosure, which also means the home becomes unavailable. Or the borrower might decide to process a deed-in-lieu of foreclosure in order to avoid having a foreclosure on their record. A number of things could happen so there is no home to buy. Or the lender may not be able to agree to the amount that you wish to pay because the two of you cannot come to an agreement on the current value.
Most important, perhaps, is the uncertainty for an extended period of time until the lender is able to make a decision. Consider yourself warned—proceed with caution if these words are included in the listing of a home you especially like. There is no reason to avoid a short sale listing—as long as you know the real deal. Trust your gut—continue to consult with it as you move through your housing purchase
Copyright © 2009, Home Ownership Matters, LLC. All rights Reserved. "Answer Book in a Foreclosure Climate" by Mildred Wilkins, available in 2009 from www.DovePublishingHouse.com.
(Please e-mail Heather at homeownershipmatters@gmail.com with any questions, comments, or concerns you might have. We appreciate all feedback, comments, and especially your questions. Don't be shy!)
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