A short sale is a a property that is being sold for less than what the current owner owes on the home. The current owner's lender agrees to accept an amount that is short of what is owed to them. A short sale requires bank approval. The bank will ultimately determine what price and terms they will accept after the contract has been signed by the seller. While the process has improved dramatically over the past couple of years, it can still takes months to close a short sale.
Not all short sales are alike. Some are much more likely to close than others. A 'pre-approved' short sale means that the seller has already met the bank's requirements to sell as a short sale. Usually the lender has already agreed to the list price (or a price very close to the list price). Once the seller has an executed contract, the lender will review it and make their determination. That can take a while.
The worst aspect of a short sale can sometimes be the seller. If the seller has not already completed the required paperwork from their lender, the process will not start until the contract is submitted. Unless the seller quickly submits and meets ALL of the bank's requirements for the short sale, the transaction can take months and months. Sometimes, the sale will not be approved because the seller doesn't qualify to short sale the property. For example, if the seller has the funds to pay the difference between the sales price and what they owe (but they don't want to pay the difference), the bank isn't going to approve the short sale.
Before a buyer makes an offer on a short sale (and certainly before you spend money on inspections or a survey), they should always determine if the seller has the bank's approval for a short sale and where they are in the process. [where: 75230]
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