Tips to Purchasing A Short-Sale Transaction
Purchasing a property which requires the Seller’s Lender’s approval (short sale) is very complex. The listing agent is working with the Sellers; however, the Lender has to approve the final numbers, as they are being asked to accept less than what is owed to them.
Offers sent to listing agents are submitted to the Banks as they come in. All terms and conditions in the following guidelines, although normal and customary for Short Sales, may change in the negotiation process in getting a final approval for the sale.
The following is a description of potential situations that can and do affect the sale. Be advised that this process will take at a very minimum forty-five (45) days after the lenders receive a full and complete short-sale packet from the Sellers/Seller’s Agent. You will need patience with this process as the Lenders have their own time frames and procedures that they must go through in order to have a successful transaction.
The Sellers will be receiving “NO CASH” from this transaction. Any additional funds usually due to Sellers from escrow accounts or prorations will be paid to the Lenders who are bearing the loss from the Short Sale.
The Sellers have “NO ADDITIONAL CASH” and have provided the required documentation of such to the Lenders for consideration and qualification for the Short Sale. The Seller will not be allowed to pay for any reports, treatments, inspections or repair items. Buyers are required to pay for any and all inspections, appraisals or certifications to satisfy due diligence.
Property is being conveyed in an “AS IS/WHERE IS” condition. There will be no warranties, expressed or implied as to the condition of the property. Seller’s limits of liability to make any repairs to the property will be zero ($0). Seller will not complete or compensate for any repairs.
Since Sellers do not have the means to provide Homeowner Association documentation, the Buyers are responsible for ordering and paying for the Homeowner Association documents to satisfy any and all due diligences per the Covenants, Conditions and Restrictions requirements to purchase a property in an association (State Mandated Rules to apply). The Buyers bear the cost of securing the Homeowner Association documents (approximately $250.00 per Association).
The actual selling price of the transaction will be determined upon receiving an acceptable “net proceeds” required notification from the Seller’s Lender and adding the Lender’s acceptable costs to that bottom line.
The Lender’s provided closing date is firm. There will be a monetary increase placed on the Buyers to compensate for additional interest or fees incurred by the Lenders for closing after the required date. Short Sales are time sensitive and agents must understand that extensions are usually not honored by loss mitigation departments, particularly if there is a bank sale date scheduled.
The Lenders may decide not to pay for Buyer’s Appraisal, Home Warranty or other “Buyers Closing Costs.”
Any required up front payments will be paid for by the Buyers.
Transactions will require a minimum of forty-five (45) days. Depending on the circumstances, it can take up to ninety (90) days for bank approval.
Buyers are responsible for re-keying the property, acquiring new garage door and association gate remotes and mail box keys once the sale has been recorded and closed escrow.
Sellers have not been able to pay for the cost of maintaining the Property. Therefore the Buyers will bear any cost and/or responsibility to have utilities turned on to satisfy any inspections the buyer shall deem necessary to complete their Due Diligence and Inspections.
Finally, if the Lenders, as part of the transaction, approve to forgive a portion of the debt, the amount forgiven is considered as taxable income to the Sellers. The IRS may not assess the tax for a year or even more after the closing, but the Seller has a legal obligation to report the deficiency.
