Understanding Form 22SS: The Lender Consent Deadline

Every week we get numerous questions about Form 22SS, the short sale addendum to the Purchase & Sale agreement. One of the most common sources of confusion is in paragraph 2, which outlines the number of days after mutual acceptance that the parties have to secure Lender Consent. What happens if that deadline passes?

If the date for Lender Consent outlined in the purchase and sale agreement expires, the agreement automatically terminates. However, termination of the agreement can be avoided. If the time limit is looming and it doesn't appear Lender Consent will be given in time, the listing broker can prepare an addendum to the P & S agreement to extend the deadline.

The addendum needs to reflect the additional time the lender will need, so it's important to talk to the bank and get a realistic estimate of their timeline. That information can then be used to talk to the selling broker and help them set expectations for their buyer. When there's uncertainty about where the transaction stands, buyers can get frustrated and walk away. If all parties have an accurate picture of the process, the chances of a successful closing are much higher.

Top 3 Myths about Short Sales

We hear a lot of misconceptions about short sales. In the interest of myth-busting, here are the ones we hear most often, and the facts behind how short sales really work.

Myth #1: All short sale negotiators charge a fee.

Most third-party negotiators, including attorneys, typically charge a fee of 1-1 1/2% of the sale price. They commonly try to get that fee paid by the lender. If the lender opts not to cover the cost, then who pays? In most cases, the seller doesn’t have the cash, or they'd be paying their mortgage. Usually, the buyer or buyer's agent is asked to pick up the cost.

Broker-affiliated negotiators like us include negotiating the short sale as a part of the professional services offered. There are no additional fees to anyone in the transaction.

Our feeling is: The market is tough enough – why make it harder to sell your listing? Which of these listings do you think will sell first?

"Short sale. Buyer to pay negotiation fee of 1 1/2% of sale price. ” “Short sale. Sale professionally negotiated by Washington Property Solutions with no fee to you or your buyer.”

Myth #2: Short sales are low-end properties.

There are short sales at every price point. Among our current listings are a $2.25 million home and two $1 million properties. Nearly 20 percent of all short sale properties sold in King County in 2010 sold for $500,000 or more. Short sales are projected to represent a significant portion of available inventory in 2012 and moving forward, and will be an important source of income for brokers as the real estate market works its way towards recovery.

Myth #3: You can buy short sales at huge discounts.

Short sale homes do sell for less, but not significantly less than market value. The selling price for short sales is usually 5 to 10 percent less than for non-distressed properties. The lender is looking to recover as much of the value of the home as possible, so they will not accept offers that are significantly under market value. So why do buyers purchase a short sale? In our experience, it's the same reason anyone buys a home- they like it. That 10% discount provides an added incentive, allowing buyers to get more house for their money.