The Short Sale Offer Addendum
During this past week alone , I have received ten new short sale requests. As a Massachusetts short sale negotiator, my services are generally not required until the buyer and seller execute an Offer to Purchase. Once the offer is signed, the buyer’s agent inevitably calls me to request the seller attorney contact information so the parties can immediately execute the purchase and sale contract. In each and every instance, I inform the buyer’s agent that it is unnecessary to sign a Massachusetts purchase and sale contract until we have third-party short sale approval. Given the increased volume of short sales, coupled with the amount of “new” agents working on these transactions, it bears mentioning why, when the proper procedures are followed, it is not necessary to sign a purchase and sale contract until third-party approval is obtained.
With regard to short sale transactions, most of the attorneys and real estate agents with whom I work prefer to execute the purchase and sale contract after having received third-party approval. That way, the attorneys don’t spend time drafting and negotiating the contract if the sale never gets approved. In order to get a firm commitment from the buyer, however, the offer usually contains an addendum requiring the buyer to remain a party to the transaction during the short sale approval period, which is typically 60 to 90 days. During the approval period, the seller agrees to refrain from accepting back-up offers. Upon signing the offer, the buyer generally places a 1% deposit, or at least enough money to ensure the buyer will remain a party to the transaction. In consideration of the seller no longer accepting offers, if the buyer chooses to walk away during the initial short sale approval period, they lose their deposit. If the approval period passes without third-party approval, the buyer has the right to extend. The addendum also states that, upon receipt of third- party approval, the parties have 5-7 days to execute a purchase and sale contract and collect the remaining balance of the 5% deposit. The purchase and sale contract typically calls for the closing to occur 30 days from receipt of written short sale approval.
While every short sale transaction is different, most lenders only require a signed offer to purchase in order to consider a short sale request. As a result, if you are able to eliminate the 7-10 days it typically takes to get a purchase and sale contract drafted and agreed upon, you are one week closer to receiving short sale approval. As a real estate agent, you can now focus your efforts on getting new listings and more signed offers. Keep in mind, I always require the buyer to conduct a property inspection, or waive their right to do so, prior to submitting the offer to the short sale lender. The reason being, if the offer is submitted subject to a property inspection, the short sale lender will not allow for a price change due to any property condition issues revealed by the home inspection. Thus, if a buyer objects to spending $300-400 dollars on an inspection prior to submitting the offer to the lender, they probably aren’t the right buyer for your short sale. I would rather find this out at the offer stage, instead of 60 days down the road after having spent many hours negotiating the short sale with the lender.
Contact us today if you are a real estate professional currently working on short sales and you need assistance keeping your buyers a party to the short sale transaction.
Related Posts
Are Realtors Subject To The FTC MARS Rule?
National Association Of Realtors: LIFE ON MARS
About the Author: Andrew Coppo of Greater Boston Short Sales, LLC (GBSS) is Massachusetts’ leading short sale negotiator. GBSS assists buyers, sellers, real estate agents and attorneys with getting their short sales closed. Contact us today if you are a homeowner facing foreclosure or a Realtor seeking assistance with a short sale transaction. GBSS is a MARS provider. Please read our disclaimer HERE.
If you are considering a Massachusetts short sale, and would like a free short sale consultation, please call Andrew Coppo to schedule a meeting or a telephone consultation at (617)264-0376.
