What is an Approved Short Sale Listing?

Before I explain what an approved short sale listing is let me first differentiate it from a Pre-Approved short sale.  There is no such thing as a Pre-Approved Short Sale.  There is such a thing as a previously approved short sale, meaning that the deal was approved and the buyer backed out.  If the sale was approved and a new buyer is obtained within the time allowed on the short sale approval letter then there is an excellent chance that  a new buyer can step in and make the same deal but there is no guarantee. 

Particularly troubling is the sale that was approved and now the "investor-buyer" tries to flip his deal to someone else.  Typically this investor-buyer will be looking for some sort of negotiation or assignment fee.  It is possible that a deal like this could be legitamate but probably not.  The lender is a party to the sale.  They must be made aware of these facts.  The lender must approve the fees charged by the investor-buyer and these charges must be clearly indicated on the HUD-1. 

The technique is called flopping, http://www.businessweek.com/news/2010-06-10/banks-face-short-sale-fraud-as-home-flopping-rises-update2-.html   The investor-buyer has an approved short sale agreement to buy for one price.  Then the investor-buyer and his agent (maybe the listing agent) put the property on the market for a higher price and sell the deal to you/your buyer for the higher price and keep the difference.  This is a fraud against the lender.  Don't be a party to it.  You could go to prison.

Everytime you put a short sale on the market you will get calls and emails from investor-buyers offering to make an offer and negotiate the short sale for you.  They are usually trying to Flop the deal.  If you do one of these deals you may not be guilty of fraud OR your lawyer may get you off after you spend the next 2 years in court.

So what is an approved short sale?

An approved short sale is a deal that has been approved through HAFA http://makinghomeaffordable.gov/hafa.html   The HAFA (Home Affordable Foreclosure Alternative) program is part of the Obama, Making Home Affordable Program.  It is for homeowners with non-gse (not Freddie or Fannie) loans, AND either do not qualify for or have defaulted on a loan modification.  If approved for HAFA a participating lender will state the minimum acceptable proceeds for the sale.  Now the price is approved.

The program is virtually unheard of in reality.  Has anyone ever done a HAFA deal?  I have just initiated my first HAFA application.  I found a seller with a legitamate hardship, who is in default for the second time has a non-gse loan and does not qualify for their loan payment.  The loan servicer has contracted with another service company to process the application.  They say it will take two months we will see what happens.