SHORT SALE CONTRACT DEPOSIT DEADLINES – EFFECTIVE DATE OR UPON SHORT SALE APPROVAL?

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.

Did you find this real estate law content useful, but need actual legal council?

Speak to a real estate attorney!

, , , , , , , ,

Don’t Get Burned By Solar Panels (Or Other Leased Items)

More and more homes are running off the power of the sun these days. Renewable energy has become a trending topic and solar panels are beginning to become prevalent in the state of Florida due to positive environmental impacts and the potential to reduce large A/C bills. Selling a house with solar panels comes with…

Standard Or “As Is?” That Is The Question

While Florida law requires no particular form of contract for a real estate transaction, the FR/BAR Contract forms are the most utilized and well-recognized residential contract forms in Florida.  The FR/BAR Contracts, created and approved by a collaboration between the Florida Association of Realtors and the Florida Bar, include two Contract forms: the Residential Contract…

Getting Up Close and Personal (Property)

When real estate agents are out and about showing homes, those homes are usually staged, lived in, and/or full of furniture, appliances, etc. So when agents get the property under contract, what exactly is conveyed with it? The “As Is” and Standard Florida Realtors/Florida Bar contracts are useful tools and have been drafted by attorneys…

DON’T BE CAUGHT WITH YOUR PANTS DOWN

Have you ever represented a Buyer that literally waits to the last second to inform you, via email, that they want to terminate a contract?  As a Realtor, what are your obligations?  Generally speaking your obligation (as Selling Agent) is to deliver the written notice of termination (or signed Release and Termination) to the Listing…

Attractive Feature of AS IS Residential Contract

The Florida Realtors/Florida Bar AS IS Residential Contract for Sale and Purchase is the preferred form of Contract for many agents, in no small measure because of its very clear provisions on how and when a buyer may terminate a contract.  These terms are found in Paragraph 12 PROPERTY INSPECTION; RIGHT TO CANCEL. Paragraph 12…

Misconception of AS-IS Contract and Disclosure

When a party sells a property, they are required to fill out a Seller’s Real Property Disclosure Statement (“Property Disclosure”).  This Property Disclosure covers a wide array of questions about the condition of the property and knowledge of facts that materially affect the property.  Many are unaware that these disclosures are mandated by Florida law. …

Time to Get Your Head Out of the Sand and Pursue that Short Sale

Most everyone is familiar with the terms “strategic default” and “deficiency balance.”  In fact, over the years Berlin Patten has repeatedly addressed the importance of getting legal representation in foreclosure actions, short sales, and debt negotiation.  However, we have seen countless instances of people choosing to essentially bury their heads in the sand and ignore…

Follow Up To “New Catch-22 In Short Sale Negotiation”

We have received tremendous feedback to our recent blog concerning lender(s) who are now forcing sellers to use auction companies to further market their property as a precondition to short sale approval.  Our previous suggestions to attempt to address the situation were (a) encourage the seller to incorporate language in their contracts to permit the…

Major Differences Between the As Is Contract and the Regular FAR/BAR Form

The As Is Contract and Regular Florida Realtors/Florida Bar Contract forms are essentially the same with the following exceptions: 1. Heading. Of course, the inclusion of “As Is” in the heading sometimes draws concern and can create minor angst for Sellers since they don’t want Buyers to get the impression that the Property is substandard.…

Tips on Inspection Periods for Short Sale Transactions

As most of you have likely seen, the demand in today’s market for short sale properties is very high, with decreasing inventory and a large pool of buyers.  In fact, property prices are increasing in many areas because of this high demand, and short sale sellers are often receiving many offers – some possibly even…

Substituting Contract Pages

We have noticed an increase in a practice, that if not done with full and proper disclosure, could lead to substantial trouble for the parties involved, including civil liability, license forfeiture, or worse yet, criminal sanctions.  The practice involves changing and/or substituting pages to a fully executed contract.   While we recognize the reality that…

Dealing With Entities As Buyers In Investment Properties

As most of you are aware, more and more investors are coming to this area to invest in distressed properties. The result is an increasing number of short sale contracts in which the buyers are entities (such as LLCs) rather than individuals. Typically, short sale lenders require the seller to provide a slew of documentation,…

Navigating a Short Sale – Tips & Reminders

With the extension of deficiency waiver tax relief, we have seen no slowdown with respect to short sales, and do not anticipate a slowdown in the foreseeable future.  With that in mind, we wanted to remind anyone who routinely handles short sales to consider the following: Do not forget about how critical it is to…

Bankruptcy Follow-up: Short Sales Post Bankruptcy

Originally Published by Berlin Patten on October 12, 2012 With the proliferation of bankruptcy filings over the last several years, we have received a number of inquiries regarding the completion of a short sale following a bankruptcy.  Yes, there are lawyers who may suggest that a homeowner who has been discharged from a bankruptcy (and…

Removal of Second Mortgages in Chapter 7 Bankruptcy Cases

Previously, the general rule in bankruptcy was that if a homeowner wanted to “strip off” or remove a second mortgage, he or she could only do so in a Chapter 13 bankruptcy.  However, that has now changed. In McNeal v. GMAC Mortg., LLC (In re McNeal), 2012 U.S. App. LEXIS 9589 (11th Cir. 2012), the…

CRSP-12 and CRSP-12 Addendums Debut

Originally Published: 8/10/2012 Effective August 20, 2012, the FAR-9 Contract will be replaced with the Contract for Residential Sale and Purchase (CRSP-12). In addition, the Comprehensive Addendum (FARA-10) will be replaced with the CRSP-12 addenda. Please see the attached link to the summary list of the changes between the FAR-9 Contract and the CRSP-12 Contract.…

Home Affordable Foreclosure Alternatives (HAFA) Short Sale Update

Originally Published: 6/19/2012 Effective June 1, 2012, the following changes were implemented in the HAFA Program: TIME FRAME EXTENDED: The program has been extended to Dec. 31, 2013. The HAFA short sale can be initiated up to Dec. 31, 2013; however, the transaction must have a closing date on or before Sept. 30, 2014. ELIGIBILITY…

Cancellation of Foreclosure Sale by Filing Bankruptcy

Originally Published: 6/13/2012 In many cases, during the process of negotiating a short sale, the lender may have already begun foreclosure proceedings. When that happens, a race begins between the seller and the bank: either the lender forecloses first, thus preventing the short sale, or the seller completes a short sale before foreclosure. Many sellers,…

Deficiency – What is it and How Much Time Does My Bank Have to Sue?

Originally Published: 3/27/2012 When an underwater home is sold in a short sale or a foreclosure, the greatest concern is almost always over the remaining mortgage balance owed by the homeowner (known as a “deficiency balance”) and how long the lender has to try to collect it.  When a property is sold in short sale,…

How Bankruptcy Can Backfire on Homeowners in Foreclosure

Originally Published: 3/12/2012 Many homeowners resort to filing bankruptcy in order to stop an imminent foreclosure on homestead property when no other legal options are available.  While, in most cases, the mortgage holder can still foreclose on the property, it cannot do so until the property is released from the bankruptcy estate.  This can take…

Backup Offers

Originally Published: 2/22/2012 Most short sale addenda have provisions for backup offers if you check the appropriate box. It is our opinion that, generally speaking, you should not check the box permitting backup offers when dealing with a short sale. It creates too many unnecessary legal and practical issues. Most importantly, many lenders and their…

Cautionary Tale Regarding Wells Fargo

The Sarasota Herald Tribune recently published an article that stated that Wells Fargo had a short sale incentive/fast track program in place. The article, which is consistent with other published articles we have seen, suggested that Wells Fargo would be willing to fast track short sale approvals and even make payments to short sale sellers…

Bank of America Short Sale Seminar Summary

The Berlin Patten short sale negotiating team recently attended a Bank of America Short Sale Seminar.  The following is a brief summary of what Bank of America advised its seminar’s attendees:  Short sales are about two primary things to Bank of America:  Hardship and net proceeds Investors are reluctant to postpone foreclosures as the buyer…

Response to Anonymous Blog Entry: Title Agents should still not be conducting short sale negotiations

On or about September 30, 2011, an anonymous reader provided a response to a blog Berlin Patten had sent to its readers regarding who can or should be engaged in the negotiation of short sales. While we debated whether or not to further comment on the subject (as the blog response did not really specifically…

Short Sale Negotiations

We have been asked by several real estate agents to investigate whether or not a title company or title agent can conduct short sale negotiations. One of Berlin Patten’s contacts at the Florida Department of Financial Services, Bureau of Investigation, Title Services, responded to our inquiry as follows: “The license for a title insurance agent does not…

Fraud Investigation – A Top Priority for Freddie Mac

In previous blogs, we have discussed our concerns about short sale fraud and the warning signals to watch for.  According to Freddie Mac’s Mortgage Fraud Officer, Short sale fraud has also become the top priority for Freddie Mac’s fraud investigation unit as well. Per the attached article, recent trends that Freddie has been alerting Real…

Assignable Contracts & Specific Buyers

Please be advised that short sale lenders are getting very strict about approving the specific buyer identified on the contract. As such, lenders are carefully scrutinizing assignment provisions in contracts. Short sale lenders who are reviewing contracts (that permit the contract to be assigned) are kicking back the contracts more and more frequently.) Lenders are…

Berlin Patten’s Short Sale and Bankruptcy Services

Real Estate professionals are frequently confronted with listing a short sale property encumbered by two or more mortgages and a seller who is strongly considering bankruptcy as its “exit strategy.” We have struggled with that same scenario… working on a short sale for months, and then the seller decides to file for bankruptcy. At that…

HAFA Policy Changes for Servicers

Lenders’ inconsistent eligibility requirements seem to be the most consistent thing we have seen with respect to the Federal Government’s HAFA (Home Affordable Foreclosure Alternatives) Program.  The Federal Government seems to have taken notice. On August 9, 2011, the Home Affordable Foreclosure Alternatives Program adopted certain policy guideline changes.  The changes, we presume, are in…

The Importance of a Municipal Lien Search

Performing a municipal lien search is crucial when purchasing property in this day and age. In many cases there are unknown or undisclosed fees, costs or other issues that will impact a buyer post-closing. In addition a municipal lien search generally will assist a seller in complying with contractual terms to avoid a default. Examples…

Short Sales – Working with Second Lenders

Anyone who works with short sales knows that it can be very difficult to get short sales approved when there is a second (or even third lender). To successfully complete a short sale, ALL lenders (among others) must agree. The problem is that in many instances, they do not. In fact, we have seen situations…

A New Buyer Can Be Substituted for One Who Walked

We have learned of a very interesting development with respect to Bank of America. Bank of America has advised that it will permit a new buyer to step into the shoes of a buyer who has walked away from a transaction.  Furthermore, Bank of America has advised that the process will not have to begin…

Deficiencies and Deficiency Judgements

We spend a great deal of time counseling prospective short sale sellers regarding the advantages of attempting to pursue a short sale rather than allowing their property to go through the foreclosure process. Many people do not realize that the foreclosure process is a two step process. The first step is the sale of the…

Bank of America Realtor/Broker Listing Agent Certification – Questions and Answers

The new Bank of America Realtor/Broker Listing Agent Certification (the “Certification”) has fostered some significant concern among real estate agents. The most common questions and our comments/responses are as follows: 1. Question: Does paragraph 1 of the Certification mean that Bank of America will not pay a commission. Answer: No! Bank of America never paid…

Wells Fargo Short Sale Addendum

As expected, Wells Fargo has followed suit with Bank of America and has put out a new Short Sale Affidavit (attached hereto). Similar to the agreements recently published by Bank of America, Wells Fargo appears to be getting more aggressive in trying to curb flips and low offers and is now requiring realtors and closing…

Bank of America Document Warning

Please be advised that Bank of America is now requiring the parties to a short sale transaction to execute certain form documents before they will consider your short sale for approval. The buyer and seller will be required to execute a new addendum, and somewhat interestingly, the agents involved in the transaction will also need…

Nonlawyer Assisting the Short Sale Seller: Ministerial Acts or UPL?

As you know, short sale negotiations (and negotiators) are coming under great scrutiny by local and federal authorities. There are significant new disclosures for non-attorneys, and now the Florida Bar is weighing in on the subject. In essence, various proposals under consideration by the Florida Bar suggest that a great deal of the short sale…

FTC Issues New Rules for MARS

The Federal Trade Commission (FTC) has issued new rules that might impact real estate practitioners who represent clients involved in short sale transactions. The Mortgage Assistance Relief Services (“MARS”) regulations define anyone providing services which assist or attempt to assist the consumer in negotiating a short sale as a “MARS” provider. Depending on certain factors,…

“No Cost” Short Sales

You may have seen solicitations from companies announcing “NO COST” Short Sales that can be closed quickly, sometimes as quickly as 45 days. We suggest that you use great caution when engaging these companies or recommending these companies to short sale sellers. First, there is no such thing as a free ride. In most cases,…
Menu