If you are looking to purchase a home, pursuing a property that is available through a short sale may seem like an attractive option. These properties are generally made available at a price that is far less than would normally be expected because the seller has fallen short on their mortgage payments, and the lender is looking to get the most out of their investment that they can without having to go through an expensive foreclosure process. Though this may seem like a golden opportunity to get a home at a bargain price, the short sale process is notoriously frustrating and unpredictable, and there are a number of shortcomings that a buyer needs to take into consideration before going down this road, including the possibility that the process will take considerably longer than a standard real estate purchase. One of the items that is likely to be included in any short sale process is a short sale addendum. This document incorporates specifics of the short sale to the real estate purchase contract.
A standard short sale addendum generally addresses a number of items that are specific and unique to the agreement of sale. These may include:
- An acknowledgement that the transaction is a short sale, and that as such there are additional third parties that have an interest in the property being sold.
- An acknowledgement that these third parties, who may include lenders, insurers, bankruptcy trustees, tax authorities and private parties will need to provide written approval of the short sale.
- A statement of the fact that the short sale is not a binding contract until all parties have provided a written agreement to the terms.
- Specific limitations on the amount of time that can go by before the contract is considered to be canceled if third party approvals are not obtained.
- An acknowledgement that the seller can pursue other offers on the property in order to get a higher price.
- An acknowledgement that the buyer has the right to cancel the proposed purchase.
These are not required terms, but are the terms that are frequently included in a short sale addendum. Because these properties so frequently involve numerous third parties and liens they can be extremely complex transactions. Buyers are advised that they need a considerable amount of patience during the process, as lenders frequently take a great deal of time before they will approve the proposal, and complications often arise.
If you are considering a short sale, you are strongly encouraged to seek the advice and legal representation of an attorney who has extensive experience in reviewing these contracts and providing you with sound legal counsel. The attorneys at Rothamel Law work hard on behalf of our clients, providing them with a knowledgeable and experienced advocate in what is often the largest investment they will ever make – their home.