Short-Sale Purchase Offers: Writing to Win Approval

Buyers approach a short sale with the instincts an ordinary sale rewards: find the seller's motivation, price aggressively, ask for terms. Those instincts are mostly wrong here, and the reason is structural.

In a normal transaction the seller decides. In a short sale the seller ACCEPTS, and then a lender decides — reviewing a file it did not create, in a queue with other files, against its own valuation and its own internal rules. The offer is not a negotiation with a person. It is a document that has to survive an institutional review, and offers written for a person tend not to.

This article is for buyers and their agents. It covers what the reviewer is looking at, what makes a file easy to approve, and what quietly disqualifies one. It deepens the short-sale guide, and it sits opposite the seller's document package, which describes the other half of the same file.

One note before the rest, because it belongs on every page in this cluster: the person on the other side of this transaction is a household under financial strain. A HUD-approved housing counselor is free and is their first call, nobody legitimate charges them an upfront fee for help, and the buying side conducts itself accordingly. Legal questions belong with an attorney; tax questions with a CPA.

What the reviewer is weighing

Strip the process down and the lender is answering one question: is accepting this offer better than the alternatives available to us?

The alternatives are a different buyer later, or a foreclosure. Against those, the reviewer weighs the NET PROCEEDS the offer produces after allowed costs, the CERTAINTY that the buyer will actually close, the TIME it will take, and whether the transaction is CLEAN — arm's-length, fully disclosed, nothing arranged off the books.

Everything below follows from those four.

Price the market, not the distress

The most common error is treating a short sale like a discount rack. It is not one. The lender orders its own valuation, and if the opinion of value lands materially above the offer, the reviewer's conclusion is that the home was underpriced rather than that the market is soft. The valuation article explains that step in detail.

An offer priced to what a normal buyer would pay, supported by comparable sales in the file, is the offer that survives. An opportunistic offer usually produces a counter at value, months later, having wasted everyone's time — the buyer's most of all, since they waited for it.

Make the certainty visible

A lender cannot meet the buyer. Everything it knows about whether the deal will close, it learns from the paperwork.

PROOF OF FUNDS or a genuine, current pre-approval, not a pre-qualification letter generated from unverified statements. A file that shows underwriting has actually looked at this buyer reads very differently from one that shows a lender said hello.

A DEPOSIT WITH WEIGHT. A meaningful earnest money deposit is the clearest signal available that the buyer intends to be there at the end.

FEW AND CLEAN CONTINGENCIES. Every contingency is an exit, and exits are what the reviewer is trying to count. That does not mean waiving inspection — see below — but it does mean not stacking conditions, and not making the purchase contingent on selling another property if that can be avoided.

NO UNUSUAL DEMANDS. Requests for repairs, for personal property, for credits, for the seller to pay costs the lender has not agreed to fund, all read as friction. A short-sale seller has no money, and the lender is not a party with an interest in accommodating anyone.

Do not waive the inspection

Short sales are sold as-is, and as-is is real: the seller cannot fund repairs and the lender is not going to. That is an argument for inspecting carefully, not for skipping it.

Households in financial difficulty defer maintenance, sometimes for years, and deferred maintenance is exactly what an exterior valuation misses. Keep the inspection contingency, use it properly, and price the findings into the decision rather than into a repair request the file cannot absorb.

Write the timeline honestly

Nothing marks an inexperienced short-sale offer faster than the dates on it. A short-sale contract needs a lender-approval contingency and dates that begin running from the date of the lender's WRITTEN approval, not from the seller's acceptance. Contracts drafted the ordinary way expire before the review finishes, and then everyone is re-papering the deal instead of closing it.

Buyers should also understand what they are agreeing to wait for. A review involves the servicer, the investor behind the loan, possibly a mortgage insurer, and every junior lienholder, which the lender's-side article maps. It takes as long as it takes, no one can promise a date, and a buyer who cannot tolerate that uncertainty should be in an ordinary transaction instead. That is not a criticism. It is a fair description of the product.

Keep it clean

Short-sale approvals require an arm's-length transaction, and both sides sign certifications to that effect: unrelated parties, no side agreements, nothing of value moving outside escrow. Buyers occasionally hear suggestions about arrangements with the seller after closing, or payments handled privately. The answer is no, and the reasoning is set out in the fraud article.

Disclose everything. A clean file is a fast file, and a file with something unexplained in it goes to the bottom of the pile.

And write it like a person is reading it

Somebody is. A cover summary attached to the offer that states plainly who the buyer is, how they are financed, what they have already done to prepare, and why the price reflects the market, does no harm and occasionally does real good. Comparable sales attached as evidence, not as an argument.

Restraint matters. The reviewer is not moved by enthusiasm and the seller is having one of the hardest years of their life. A calm, complete, correctly dated offer at an honest price is the whole method.

To continue, the short-sale guide is the map, and the step-by-step process shows what happens after your offer goes into the file.

Anthony Grynchal has been licensed in California since November 2009.