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Do we have to wait for the approval of the bank in order to apply for mortgage? shortsale home.

Hello! we have an accepted offer and a contract sign both ways. The bank and our lawyer told us to wait for the approval letter from the owner's bank (accepting our offer) in order to apply for the mortgage. The contrat was just sign and our realtor called us screeming at my husband and now she doesn't want to pick up the phone. She made my husband said that we do not have the mortgage and hung up. What is the process here? what are the rules? Why apply for mortgage if we do not know if the owner's bank took the offer. At the end we will be the ones losing money.  
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April 05 2011 - Town of Ossining
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Best Answer
Hi Edna,

You are supposed to wait and be sure the bank is on board with the offer. Until you have that, you don't really have a deal. A short sale requires the executed contract between the buyer and seller, AND the bank's approval. ALL SHORT SALE OFFERS ARE SUBJECT TO LENDER APPROVAL. And that means call your lender, let them know where everything is, and then wait for the bank's approval. I can't believe the agent would scream at you and your husband. You should call the agent's broker and complain. Most agents are good, hard working people, so please don't judge us all harshly by one agent's very bad day :-/
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April 05 2011
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I was waiting, waiting just like you for the last condo. After 2 months they asked me if I still like it? I said no because I find the better one:
I bought a (short sale) condo:  I signed the contract and made a offer on 3/16. Open the escrow on 3/24.The lender got all documents on 3/30.Today, I get the lender approval. The owner alrdeady move out last week. Now, I'm ready.... My agent will let me know after all the parties sign  today.
Be patient...and keep looking... Good luck.

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April 14 2011
You can submit your loan with the contract you signed with the seller and have your complete credit application approved pending appraisal. Since the appraisal fee should be your only upfront cost for the mortgage process, you have nothing to lose and will be saving yourself a lot of grief when the bank finally does approve the short sale and you're "under the gun" to close quickly. It's also good to have a mortgage commitment in hand  for piece of mind. Contact me if you need further assistance.

Ed
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April 08 2011
As a side note to the agents... please have some experience and training in short sales before you answer questions about them. There are many misconceptions out there, like the lender has to approve it before you have a contract. Not true. The owner is still the individual not the bank. The owner cannot sign more than one contract, so everything after that is a back-up. The contract is contingent upon the bank's approval, but it is still a contract. The buyer should move forward on his/her approval. If this deal falls through, they are already fully approved for the next home. This buyer is beyond a pre-approval letter. It is time for him to get fully approved. 

Do you know about MARS? Do you know about BofA's new program? Please get some training, watch a webinar, something before answering these questions. While the bad outcome won't affect you, it can have horrible consequences for both the buyer and seller.
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April 06 2011

Actually, you do have a contract. The bank is not the owner yet. The bank's approval is a contingency much like a contingency for a buyer who has to sell his/her house yet. Your lender can get you, as the buyer, fully approved now b/c you have an executed contract. Actually, your lender doesn't even have to have a contract to get you fully approved. Your approval is a seperate issue from the approval for the home.

When the bank approves the short sale (hopefully), then your lender just has to get the home approved. That's when you do your inspections and appraisals. In the last short sale I closed (last week), the buyers were only given 10 days to close. Their lender had not worked on the loan at all, and if they had not had the cash to scrape together, they would have lost the house and it would have gone to foreclosure. Get fully approved now.

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April 06 2011
First, you need your lender to pre-approve you.  I am sure that is already done.  Then, you need to speak with you lender about the property and have all your ducks in a row.  Make sure your lender has all your financials, everything has been reviewed, and if possible, sent to underwriting.  They can do this, and they should do this even if the short sale is not yet approved.

You don't have to have the appraisal done yet.  However, if your offer IS accepted by the 3rd party, they may only give you 14-30 days to close.  So, no, you don't have to have the loan just yet, but you need to have already started the process so that you are ready to tie all the loose ends up.

Your agent should know this, and the listing agent should know this.

Do NOT wait until you get 3rd party approval before you take the first several steps.  Be ready!
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April 05 2011
I presume you have talked to a lender about getting a mortgage as you would've needed a pre qualifying letter of approval from the lender.

In order to take the next step, your lender would need a purchase agreement that is signed by all parties. As you do not have the lenders approval, you can't move forward with the loan.

With short sales, it's always best to withhold earnest money until the bank approves the sale. In some states there is now a short sale document that essentially states you will withhold your earnest money and reserve the right of inspection until the bank has approved the sale.
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April 05 2011
 
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