Article Title

Lyman J. (Greg) Gregory, III

lgregory@mmrlawfirm.com

828.281.2100

90 Southside Avenue,

Ste 100

Asheville, NC 28801

90 Southside Avenue Suite 100

90 Southside Avenue Suite 100

A Legal Moment

>

Short Sale Contracts

        Short sales occur when the proceeds of the sale are insufficient to pay off the loan, or total liens, on the property.  They have become so common that there is now a standard Short Sale Addendum (Form 2A14-T) for use with the form Offer to Purchase and Contract.

        The process of a short sale is the following: (1) enter into a contract, (2) gather documents from the seller for the short sale package, (3) submit the short sale package to the seller's lender, (4) follow up with the lender regularly, and (5) negotiate final terms.

        Short sales are fraught with pitfalls such as sellers' inability to pay required fees, the length of time (1-9 months) for approval, a buyer's unwillingness to wait, a BPO or appraisal coming in higher than the contract price, commencement of foreclosure proceedings, and a seller's declaration of bankruptcy.  If you do attempt a short sale, here are some tips for completing short sale contracts and reaching a successful closing:  

• > Because lender approval of short sales may take up to nine months, set the closing date 30 days after lender approval
• > To comply with the terms of the Addendum, be sure the seller takes all backup offers and submits them to the short sale lender
• > Fulfil your duty as a broker to disclose to the buyer whether a foreclosure proceeding has been filed
• > Advise your short sale sellers to get tax advice because forgiven debt may be taxed as income
• > Arrange for your buyer to have a pre-qualification letter or proof of funds letter to submit to the short sale lender
• > Follow up with the short sale lender at least weekly to be sure the review is progressing
• > If the short sale is rejected, find out what can change to secure approval 

        Short sales quite often fail.  If you do get involved in one, I hope this information helps you reach the closing table.

Do not hesitate to contact me to receive more information on this topic or to suggest topics for future editions of 'A Legal Moment'. You may not rely on this content as legal advice for any specific situation, but should instead contact an attorney for specific advice.