No short sale rider to contract?

Question

Hello BP Fans,

I'm currently trying to purchase a short sale in my area. The sellers agent countered today and they want to remove the Short Sale Rider addendum to the contract. Have any of you guys seen this before or completed a short sale without that language in it? It basically gives me (the buyer) a way out of the contract all the way up and past the lien holder approval.

The deal would be great at the price but I feel like the agents trying to strip out our rights as a buyer in a short sale.

Account Closed · Answer

No worries.  For some reason, I suspect whatever is going on with the elimination of the SS rider is probably not as simple as a great offer.  Hopefully the OP will post back and let us know how it works out.

J Scott · Answer

Got it...I must have misinterpreted what you were saying above...sorry!

Account Closed · Answer

Jonathan Sher  Do you know why they want to remove the rider?  Do you know if your offer was high enough to make it a regular sale?

Account Closed · Answer

J:  If a seller gets an offer that's high enough to pay everything off, including the agent, then it's not a short sale.  All of the short sale language contingencies in the purchase agreement such as "bank approval" could be removed. The bank then only has to respond to the final payoff demand, like they do in any straight sale with mortgages to be paid off.

If indeed the OPs offer will get the deal closed and everyone paid, it's possible the seller and listing agent miscalculated the need for a short sale. Plenty of sellers are only a little short and need a short sale in order to get the agent and closing costs paid.  The agent could have miscalculated what the property would bring or misunderstood the total debt and told the sellers they needed a short sale when they didn't.  Wouldn't be the first time I've seen that happen.

Wayne Brooks · Answer

J  Scott  I'll check on that.  But that is how we write every contract, with a time limit for lender approval of course.  In fact, our state approved SS addendum specifically has this language, which would override the "closing date shall be ________"  in the AsIs Contract.

J Scott · Answer

This a common mistake in short sale contracts.  Not putting a closing date and instead putting "within x days of short sale approval" as the closing date will make a real estate contract non-valid, at least according to my real estate attorney (who are the largest attorney closing firm in the country).  I guess this could be specific to my state, but I highly doubt it.

For the contract to be valid, you need a specific closing date.  I recommend 4-8 weeks out.  There can then be a stipulation that says closing will occur with x days of short sale approval, but no later than the specified closing date.

If the closing date approaches and the bank still hasn't responded, you can negotiate an extension if both parties agree.  I generally will do a 30-day extension as many times as necesassary.

Wayne Brooks · Answer

The "closing date" is typically 20-45 days after short sale lender approval, depending on whether it's a cash or financed offer.  Also, there should be an approval time line, such as buyer may terminate if no approval in 90 days and/or automatic termination at 120 days, etc. There has to be reason on both sides.

Patrick L. · Answer

A closing date 6 months out is not going to be taken seriously.  I always use "Within 15 days of short sale approval" as my closing date.  Any approval from the bank is generally going to be for no more than 30 days from the approval letter.

Jonathan Sher · Answer

Hey Scott, I originally put the closing date for 9/30/13 to give plenty of time and in the counter they want it to read "30 days after lien holder approval so that's another change they made. Plus the real estate commission wouldn't like that closing date in a contract.

J Scott · Answer

That doesn't need to be the case, and that provision in the contract doesn't seem very fair to the seller.  If you're trying to be fair to both sides, why don't you set the closing date to some reasonable point in the future (4-6 weeks) and then if/when the contract expires without a bank response/approval, you and the seller both have the option to extend the contract or walk away.

This is more reasonable than you having the opportunity to walk away at any time, especially given that the seller likely has a lot riding on the sale.