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Who sets the price on a Short sale is it the lender or the seller?

Can the lender come back and raise the asking price after the P&S has been signed?
  • January 14 2009 - Amesbury
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Answers (7)

With a short sale, the bank will issue an approval letter once all of the "hardship" information has been reviewed by the loss mitigation department. As you can imagine, they are quite busy, and this can take  a while. Once the bank has reviewed the short sale request and more importantly the "net sheet" or HUD draft showing what they will take after, offer price, back taxes, unpaid condo fees (if applicable) and muni leins if any and most importantly Realtor fees... The approval letter will not be open ended, and if a P&S has been signed by the bank appointed attorney, and you are scheduled to close before the deadline set by the bank, there should be no reason to raise the price. If you cannot close by the deadline, then an extension will need to be agreed upon, or back to square one...
  • January 14 2009
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Is the seller than setting the price below market value on purpose knowing it won't cover the agreement with the bank?

  • January 14 2009
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Your actual question is can the lender come back after P&S. The answer is the P&S is usually signed after a short sale price and terms have been approved by the bank. THe bank can always back out but it is very unlikely due to the fact that the closing will be quick after P&S. The bank usually gives the approval based on a number of days to close. If you have further questions you can call your bank and or contact me through my profile.
  • January 14 2009
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"the realtor sets the price..." wow! somebody slept through class! The realtor NEVER sets the price, the realtor may advise on market conditions, but it is the OWNER that sets the price, always.

Now, in a short sale, the owner sets the price, the buyer and the owner negotiate, but the contract they enter into is conditional to the banks agreement. Thus, when the bank gets around to responding, they can feel to agree/disagree to whatever they want to. Obviously price is one thing they may decide they don't agree with.
  • January 14 2009
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Of course, the fastest close means a lower price and less commission to the agent. There may be conflict of interest between what is best for the distressed seller and the agent.


The second dynamic is the bank’s need to decrease the amount of loss written off and avoiding taking ownership of the property. Some banks will use an addendum that says the bank can unilaterally change the contract up until close. if the appraisal comes in higher than the contract price, then the bank may demand a higher price at the last minute.


The short sale can be a complicated dance with several partners to close the transaction for the seller, bank, and the buyer.

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This is not tax or legal advice. Seek appropriate tax or legal counsel.


A short sale has several competing dynamics. Who sets the price and approves of the price can differ.


The listing agent is attempting to maximize the price. The price might be correct or it might not be if the market is experiencing downward price pressure. With the Mortgage Debt Forgiveness Relief Act http://www.irs.gov/individuals/article/0,,id=179414,00.html pricing according to the market may not be in the distressed seller’s best interest for a primary residence. The distressed seller’s best interest may be the fastest sale possible regardless of the price to avoid a foreclosure or alleviate the emotional and financial stress as fast as possible. A loan deficiency up to $2M on a primary residence is not treated as taxable income under the act. Whether the loan is shorted $50k or $500k is irrelevant too the homeowner in a non deficiency state when there no promissory note for the loan deficiency after close.

  • January 14 2009
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The realtor usually sets the asking price for the MLS, which usually has nothing to do with what the lender will want.
  • January 14 2009
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