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Northern Virginia's Definition of Short Sale Approval

By
Real Estate Agent with Long and Foster Real Estate VA License # 0225089470

Northern Virginia's definition of short sale approval generally boils down to the following sentence:

Approval by lienholder(s) to accept the net proceeds from the sale of the the home as full payment for the underlying debt.

This sentence may be worded slightly different in the various versions of the short sale contingency addendums ciculating in the Northern Virginia market, but the message is the same.  The definition revolves around two important phrases:  NET PROCEEDS and FULL PAYMENT. 

More and more lienholders are asking for additional money from the short sale sellers in the forms of cash contribution or a promissory note.  If a lienholder has written a short sale approval letter accepting the terms of a short sale contract, and are asking the sellers to repay $15,000 over 10 years as part of the approval letter, is that short sale approval?

The answer is NO. 

The above scenario means the lienholder is NOT accepting the proceeds of the sale as payment in full for the loan.  They are seeking additional money.  When this scenario pops up, the short sale approval contingency has not been removed.  

Why is this so important?  A short sale seller is not contractually obligated to accept any terms that do not have the lien holders taking the net proceeds of the sale as payment in full for their loan(s).

If you are thinking of selling your home in a short sale situation, or thinking of buying one, it is important to know the contract contingency on which your sale will be dependent.  More importantly, it is critical that the Realtor you hire to represent know the contingency inside and out. 

Chris Ann Cleland, Realtor (Licensed in Virginia), Short Sale Specialist

703-402-0037, chrisann@LNF.com

 

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Larry Ludlow
Keller Williams Realty - Monroe, NC

every state needs to adopt something concrete huh? Good luck and God bless

Sep 17, 2009 10:03 AM
Anthony Stokes-Pereira
Better Homes and Gardens Rand Realty - Nanuet, NY
Realtor

Hi Chris Ann;

Great post with super information for home buyers and investors, thank you for sharing.

Sep 17, 2009 10:04 AM
Sharon Lee
Sharon Lee's Virtual Assistance - Jonesborough, TN
Retired and loving life

Hi Chris Ann-This is an excellent informative post for anybody that is looking for info on short sales. Very nicely done. Hope your day was a good one. <SMILE>

Sep 17, 2009 10:09 AM
Chris Ann Cleland
Long and Foster Real Estate - Gainesville, VA
Associate Broker, Bristow, VA

Larry:  Northern Virginia is a region of the state unto itself.  This is our regional short sale contingency language.

Anthony:  So many pitfalls when it comes to short sales.  And with them dominating our local market, it's so important to get information out there.

Sharon:  After reading so many of my posts you shoudl be able to sell a short sale yourself.  :)

Sep 17, 2009 10:14 AM
Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Chris Ann=Once again you prove that you know your stuff.  I honestly didn't know that a promissory note didn't remove the short sale contingency.  So does that mean if a buyer sees that on a lender approval letter that they could still walk, if all other contingencies have been removed?

Sep 17, 2009 01:19 PM
Trey Thurmond
BCR Realtors - College Station, TX
College Station , Texas Homes

Chris Ann

As Cindy says... you know what you are doing. I thing this kind of info is so useful to those of us that haven't yet had to do too many short sales.  We did a few in the 80's here and they were called "Work-outs."   I am sure we will see more. When we do ....I am digging up all your blogs on short sales! :o)

Sep 17, 2009 01:45 PM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Chris Ann:  Thanks for printing this.  I have checked the wording on the approval letter from one of my short sales that is set to close in about a week, and that wording IS there.  Net Proceeds from the sale of the home for Full Payment.  Again... thanks so much.  Take care...

Sep 17, 2009 07:00 PM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Chris Ann: Your comment to Larry is something I, too, have experienced in two states... Ohio and Texas.  There are several areas in each state... where things are done quite differently.  In Ohio, the areas of Cleveland, Columbus and Cincinatti all had marked differences in some of the ways Realtors did their business.  All quite legal, of course, but... the further south you got... the more numerous the addendums became... depending on the "quirks" of the area.

So yes... not only to some things change state to state, but they can, and do, change in different areas of some states.

Sep 17, 2009 07:03 PM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

We have similar verbiage in Sacramento for our short sales as well. It is subject to the seller accepting the conditions under which the short sale approval is granted. The seller is not obligated to sign the short sale approval letter if the seller objects to the terms.

sacramento short sale agent

Sep 18, 2009 02:28 AM
Chris Ann Cleland
Long and Foster Real Estate - Gainesville, VA
Associate Broker, Bristow, VA

Cindy:  I've always looked at it from the sellers point of view, but technically, I suppose they could. 

Trey:  Or just pick up the phone and call me.  Regional rules will vary, and you want to make sure you know how your MLS is registering them. 

Karen Anne:  I imagine a lot of the short sale verbiage is similar,  I have heard horror stories from folks like Elizabeth Weintraub where insolvent sellers were asked to take a cash advance against credit lines.  No seller should be forced into that position.

Elizabeth:  And the letter must accept contract terms.  The bank can't come back and say, "Yes, we accept, but only if you change sales price to X and seller subsidy to Y."

Sep 18, 2009 02:49 AM
Chris Olsen
Olsen Ziegler Realty - Cleveland, OH
Broker Owner Cleveland Ohio Real Estate

Hi Chris Ann -- Great info.  I told this info once to a buyer before we even setup the appointment for a short sale and he said to pass because of getting to the very end and potentially having the transaction fall apart.

Oct 01, 2009 02:57 PM
Chris Ann Cleland
Long and Foster Real Estate - Gainesville, VA
Associate Broker, Bristow, VA

Chris:  I've heard of them falling apart at settlement.  They can go very smoothly, or be full of landmines.

Oct 02, 2009 12:22 AM
Anne Clark
Metro Referrals - Gainesville, VA

This is a great post that makes what a short sale contingency really is very understandable.  It's not just getting the bank to say yes, but also to not ask for anything additional and to forgive the outstanding debt.

Sep 04, 2010 08:47 AM
Chris Ann Cleland
Long and Foster Real Estate - Gainesville, VA
Associate Broker, Bristow, VA

Anne:  This is the most critical thing for buyers and sellers of Short Sales to understand.  It's the reason buyers tend to shy away from them.  A seller can get an approval letter that doesn't release them from a future deficiency, and it's technically not Short Sale Approval.  The seller could walk the day of settlement and no one could do anything.

Sep 04, 2010 09:11 AM
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