In previous postings, I’ve focused solely on the listing agent or the homeowner who is selling the property.
However, as I’ve been reviewing offers submitted on multiple properties that I’ve been selling short, I’ve noticed some issues with the contract / offers that are easily resolved with a clearer understanding of the short sale process and the appropriate contract language.
First, all offers should be submitted as “subject to lienholder(s) approval”. It is important for the Buyer’s agent to remember that regardless of whether the homeowner accepts the offcer, the deal is contingent on the lienholder also accepting your offer. That is why it is a short sale. The homeowner doesn’t have the ability to satisfy the lienholder in full so there must be acceptance from the lienholder to agree to release their lien for less than full amount and allow the property to be conveyed.
Second, all short sale offers should be with the understanding that the prospective buyer is purchasing the property in “As Is” condition. A lienholder can’t/won’t make any repairs or improvements because they don’t own the property. The homeowner is highly unlikely to make any repairs or improvements as well because there is no financial incentive to do so. Any time or money that they invest in the property will not be recouped as the homeowner cannot get any money at closing in a short sale.
Third, a short sale offer should not request money back at closing for repairs, closing costs or prepaids. Usually the only time a bank will give money back at closing is for serious repairs needed that are not discovered until the inspection. An example might be an issue came up with the septic system that was unknown at the time of the offer. In a situation like this, I recommend that you get a repair estimate and submit it to the bank along with the inspection report.
Lastly, all dates on the contract including the closing date, the date of inspection & the mortgage contingency date should be contingent upon receiving short sale acceptance. A typical example might be the following:
Closing date 30 days after receiving short sale acceptance
Inspection date 7 days after receiving short sale acceptance
Mortgage Contingency 14 days after receiving short sale acceptance
All of these recommendations are designed to protect both buyer and seller and to help make the transaction as seamless as possible.
