Imagine you are in the final stages of your short sale negotiation with your lender. You haven't received the final OK, but they have completed and recorded their price opinions and from their own time line and your experience, you know the lender is going to give you an agreement letter soon. The buyer is still holding true and the magic day comes. Your seller is happy you contact the buyers agent and he informs you they just bought something else or they have just had a change of heart. A little buyers remorse maybe. Talk about a downer for the seller and listing agent! But is everything lost....nope.
Now is the time to start down the list of backup offers you have been accumulating. As you look at each one your consider them for a couple of factors. First is the asking price the same as the previously approved offer. Then do the seller concessions provide the same or more net return to the lender. Most lenders will have approved the original offer by buyers name, list price, net to the lender and to the 2nd, and accumulated cost to close. Since you have a new buyer the original lender approval will not be valid. Well how bad is that? Depending on the lender, some will just make minor changes to the agreement letter and send it back. But unfortunately that is not the norm. Most lenders will take 2 to 3 weeks or maybe more to send the package back to the investor and have them reevaluate it. If the lender approves it and sends you a new agreement letter you have been delayed some time but you still have deal.
Does it always happen nice and clean? Not really. Often the price opinion is now past 90 days and they have to order a new one. That will add 2 to 3 weeks to the approval. If they have taken a long time to evaluate the offer, they may also ask for updated financial information. Some lenders have already passed you to a closing agent. The agent that did the original evaluation is off to other distressed loans. The list of things that can go wrong from here just builds. It will work out however, but now more time and more patience is needed. So is there a solution? Use a strategy to help prevent the crisis. Help the buyer to make a stronger commitment to the deal. Ask for non-refundable earnest money from the buyer to show commitment all the way through the lender approval process. Buyers are more committed. If they refuse, then the next buyer that comes up that meets the market price and is willing to provide non-refundable earnest money assumes the lead position. The Short Sale addendum in Arizona approves this strategy and Realtors should take advantage of it to improve the sellers short sale negotiation with the mortgage lender.