Originally Published: 5/4/2012
With 2012 being the year of the Short Sale, you need to be familiar with differences in the contract forms being used in the marketplace. Typically, in a short sale transaction, we are seeing the Florida Realtors/Florida Bar (“FR/BAR”) As Is Residential Contract form (“As-Is Contract”) being used along with either the FR/BAR Short Sale Approval Contingency Rider (“Rider G”), or the Florida Realtors Short Sale Addendum (“SSA-3”).
If Rider G is used with the As-Is Contract, the Initial Deposit deadline is tied to the Effective Date not Buyer’s receipt of the Short Sale Approval from Seller. Under Paragraph 5 of Rider G, all the time periods computed from the Effective Date commence upon Buyer’s receipt of Short Sale Approval from Seller with the exception of the Initial Deposit, Short Sale Approval Deadline and Contract Expiration Date. As the current Chair of the FR/BAR Attorney Realtor Committee and having served on the Sub-Committee that drafted Rider G, we felt that it was important that a Buyer actually place money in Escrow to show that the Buyer was serious about purchasing the Property. We wanted to discourage Buyers from entering into numerous short sale contracts tying up a Seller’s property with no real intent on purchasing the property or worst yet flipping it to someone for a higher price. Therefore, if you are using the As-Is Contract and Rider G and check the third box and leave the number of days blank, then the Initial Deposit is due 3 days from the Effective Date and not Buyer’s receipt of Short Sale Approval unless you provide otherwise i.e. on Line 28 “Effective Date” is changed to “Buyer’s receipt of Short Sale Approval from Seller”.
In contrast, if you use the As-Is Contract with the SSA-3 and check the first box under Paragraph 3 of the SSA-3, then except for Approval Deadline, all time periods, including deposit(s), commence from Buyer’s receipt of Short Sale Approval from Seller. If you check the second box under Paragraph 3 of the SSA-3, then all time periods commence from the Effective Date. Also, keep in mind when using the SSA-3 that the Closing Date is not changed by SSA-3 like Rider G which under Paragraph 6 changes the Closing Date to a specified number of days after Buyer’s receipt of Short Sale Approval from Seller which is 45 days if left blank.
In summary, it is important for all parties involved in a short sale transaction that the parties are serious about the transaction. Therefore, the Buyer should be required to deliver a deposit up front and not upon Buyer’s receipt of Short Sale Approval to show that the Buyer is willing to tie his/her money up pending receipt of the Short Sale Approval from Seller which hopefully will discourage Buyers from entering into numerous contracts either hoping to flip it for a higher price or go with the first one that receives short sale approval.