In a short sale it is always a good idea to close as quickly as possible. Just because you have
an approval letter with a green light to close by a certain date does not mean that things won’t
change. The bank will usually honor the terms of the approval as long as it closes in the given time
frame, but the terms may change if you have to get an extension.
Extension: As an example, I just had a file where we were given almost 60 days to close. In the
world of short sales that is a huge window as it is usually just 30 days. The Buyer was getting
a USDA loan and, of course, it took longer than the allotted 60 day. (note: USDA loans don’t
work well with short sales) All we needed was a one week extension. We got the extension but the
guidelines changed with that servicer since the original approval and the closing costs were
eliminated this time through. We went to the top with this but in the end we were not able to get
the previously approved closing cost back in the deal. The Buyer had to go back to underwriting
and start over without closing costs.
Service Release: Another lurking demon that will upset the apple cart (as well as the Buyer, Seller,
agents and us) is a Service Release. In short, a Service Release is when
the file is moved from one servicer to another. This can be because the note was purchased by
another investor or the service contract was given to another servicer. It doesn’t really matter
why, nor is there anything you can do about it other than start over. It can happen at anytime
and usually comes without warning. We have been three days away from closing and had the file
Service Released to another servicer. Yep, we had to start over from the beginning.
Foreclosure: Lastly, our old nemesis foreclosure is back in full force. There are some new
servicers showing up (Nationstar for instance) whose marching orders seem to be to get this file
to foreclosure as quickly at possible. There has never been a guarantee that the bank would hold
off on the foreclosure sale if there was a short sale offer in the system, but the unwritten rule was
that they would extend the sale date most of the time to allow the short sale to close. Well some of
the servicers did not get the memo. I just had two files where the property sold on the courthouse
steps in the middle of a short sale. Both had solid market price offers and were close to approval.
So the bottom line is that if you have an approval in hand, get to the closing table as quickly as you
can.