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