This is a newer form in the state of Minnesota to further attempt to clarify issues in a purchase agreement, when dealing with a short sale. This is a great form because it does clarify 3 points that keep coming up. All of these points are negotiable. Below is the main language from the front page of the form.
SHORT SALE CONTINGENCY ADDENDUM
This form approved by the Minnesota Association of REALTORS®,
which disclaims any liability arising out of use or misuse of this form.
© 2009 Minnesota Association of REALTORS®
PART 1) The proceeds of the will not be sufficient to fully pay off all mortgages and other liens against the property. As a result, Seller must obtain “short sale” approval from one or more creditors. There may be various lien holders from whom Seller may need approval: this includes but is not limited to senior and junior liens, if any, homeowner’s associations or tax liens. Short Sale Approval in this Addendum is defined as a mutually acceptable agreement between the creditor and Seller to release their liens. This Purchase Agreement is contingent on the Short Sale Approval by Seller’s creditors. Seller shall obtain the Short Sale Approval(s) and notify Buyer, or licensee representing or assisting Buyer, in writing of the approval(s) no later than ______________. If Seller fails to obtain the necessary approval(s) and provide Buyer, or licensee representing or assisting Buyer, with written notice by this deadline, this Purchase Agreement is canceled, in which case Buyer and Seller shall immediately sign a Cancellation of Purchase Agreement directing the release of the earnest money to Buyer
The following provision(s) modify and supersede any conflicting term(s) in the Purchase Agreement and any Addenda there to ONLY IF the corresponding box is marked (Select appropriate option(s)
PART 1 EXPLAINS THAT THERE IS A TIME LIMIT ON HOW LONG THE BUYER WILL AGREE TO WAIT FOR THE SELLER TO GET THE NECESSARY APPROVAL IN WRITING FROM THE BANKS TO MOVE FORWARD WITH A SHORT SALE. THIS IS A VERY NEGOTIABLE POINT BECAUSE IT HAS TO BE LONG ENOUGH FOR THE SELLER TO OBTAIN APPROVAL BUT NOT LOCK THE BUYER IN FOR 6 MONTHS. IT ALSO MAKES BOTH PARTIES AWARE THAT THE BANKS DO AVE TO GIVE APPROVAL. SOUNDS OBVIOUS BUT TO SOME IT IS NOT. IF THE SELLERS DON'T GET APPROVAL WITHIN THAT TIME LINE CONTRACT IS CANCELLED.
PART 2) Not withstanding any provision of this Purchase Agreement to the contrary, Buyer shall not be required to provide earnest money until Short Sale Approval has been obtained. Buyer shall pay the earnest money within three business days after Seller provides written notice to Buyer, or licensee representing or assisting Buyer,
that said approval has been obtained from all mortgagees and lien holders.
PART 2 EXPLAINS WHERE THE EARNEST MONEY STAYS. TYPICALLY IN THE STATE OF MINNESOTA IT IS REQUIRED THAT THE EARNEST MONEY BE DEPOSITED IN TO A BROKERS TRUST ACCOUNT WITHIN 3 BUSINESS DAYS OF FINAL ACCEPTANCE.
PART 3) Not withstanding any provision of this Purchase Agreement to the contrary, the time frame to perform inspection(s) shall commence on the date that Seller provides written notice of Short Sale Approval from all mortgagees and lien holders to Buyer, or licensee representing or assisting Buyer, rather than on final acceptance of this Purchase Agreement.
PART 3 EXPLAINS THAT THERE WILL BE NO INSPECTION UNTIL APPROVAL OF A SHORT SALE HAS BEEN OBTAINED RATHER THAN WITHING X NUMBER OF DAYS FROM THE FINAL ACCEPTANCE. THIS WAY THE BUYER IS NOT SPENDING MONEY ON A HOME THEY MIGHT BE ABLE TO BUY.
PART 4) Notwithstanding any provision of this Purchase Agreement to the contrary, Seller, or licensee representing or assisting Seller, SHALL or SHALL NOT have the right to continue to offer the property for sale until this contingency is removed.
PART 4 EXPLIANS THAT SOME BUYERS FEEL THE HOME SHOULD BE PUT INTO PENDING AS SOON AS THE BUYERS AND SELLERS AGREE TO THE CONTRACT. DUE TO THE LENGTH OF TIME TO GET AN APPROVAL FROM THE BANK, THIS MAY NOT BE A WISE MOVE ON THE SELLERS PART. IT ALL COMES BACK TO NEGOTIATION AND WHAT THE OTHER PARTS OF THE CONTRACT SAY.
THIS PAGE IS PART OF A LEGALLY BINDING CONTRACT BETWEEN BUYER(S) AND SELLER(S).
IF YOU DESIRE LEGAL OR TAX ADVICE, CONSULT AN APPROPRIATE PROFESSIONAL.
This form has saved a lot of hassle and misunderstanding for me on both sides of a transaction and is some thing to consider.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
Thursday, February 4, 2010
Monday, February 1, 2010
Short sale seller information. Some facts you should know before making a decision.
I am continuing with short sales in many of my blogs due to the continuing confusion about them completely understandable. There seems to be so much misinformation floating around about them. Not to mention the amount of calls and emails I receive from both buyers and sellers wanting information. They usually begin with I heard from my friend or read some where about x, is that true?
Even though both sides of the transaction feels the pain of the whole thing, there are very different things to consider if you are a seller vs. a buyer. Below is a basic outline of what I typically cover with a seller when we sit down the first time to discuss the selling process. The one thing you always want to keep in mind is every transaction is different and there are many unknowns that come up. That is something you can't control no matter how prepared you are. An experienced agent will be very helpful in that regard. Again I can't stress enough how important it is to speak with an attorney and tax accountant before making a decision to short sale your home. Every states laws are different and you need to know where you stand.
A short sale occurs when the proceeds of your home sale will not be sufficient to fully repay your creditors. Because of this, it will be necessary to come to an agreement with your creditors to accept less than the full amount of the debt you owe in order to release the liens on your property. Without this agreement, your home cannot be sold (unless you are able to bring money to the closing). If you are facing foreclosure, the decision to proceed with a short sale or to allow the property to be foreclosed is a difficult one. You should consult with an attorney or tax advisor before making your decision. There are also several nonprofit organizations that may be able to help with this decision.
Should you choose to pursue a short sale, there are a number of issues to keep in mind:
Your creditor will likely communicate with you by mail to indicate whether it will accept less than it is owed. If the creditor approves, the creditor will agree to release the liens on the property. But you should also determine whether the creditor intends to waive its rights to any shortfall, or whether it intends to pursue you for the shortfall after closing. If the communication regarding this issue is at all unclear, it is very important that you contact the lender for clarification before continuing with the sale.
If you are in the process of foreclosure, it is important to understand that the process will continue even though you are pursuing a short sale. Typically, a foreclosing lender will not delay the foreclosure process because you have the property on the market or even if you have a purchase agreement signed. Therefore, you need to stay informed about your foreclosure process, and in particular understand the redemption period deadline that may apply.
There may be tax consequence to you as a result of the short sale. For example, if your short sale involves the sale of property that is not your primary residence, you will be taxed on any “forgiven” debt. Other rules apply; it is important that you contact a tax consultant before making your decision.
In Minnesota we have a longer redemption period than many states which can work in the favor of both the sellers as well as the buyers. It can take a long to get all of this sorted out, so know as much about the process going it. Believe it or not the more you know of your situation the easier it will be to make the right decision for you. Don't just jump into it without all the facts, the process is hard enough on a family already. By doing the research first it should ease the burden a bit.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
Even though both sides of the transaction feels the pain of the whole thing, there are very different things to consider if you are a seller vs. a buyer. Below is a basic outline of what I typically cover with a seller when we sit down the first time to discuss the selling process. The one thing you always want to keep in mind is every transaction is different and there are many unknowns that come up. That is something you can't control no matter how prepared you are. An experienced agent will be very helpful in that regard. Again I can't stress enough how important it is to speak with an attorney and tax accountant before making a decision to short sale your home. Every states laws are different and you need to know where you stand.
A short sale occurs when the proceeds of your home sale will not be sufficient to fully repay your creditors. Because of this, it will be necessary to come to an agreement with your creditors to accept less than the full amount of the debt you owe in order to release the liens on your property. Without this agreement, your home cannot be sold (unless you are able to bring money to the closing). If you are facing foreclosure, the decision to proceed with a short sale or to allow the property to be foreclosed is a difficult one. You should consult with an attorney or tax advisor before making your decision. There are also several nonprofit organizations that may be able to help with this decision.
Should you choose to pursue a short sale, there are a number of issues to keep in mind:
Your creditor will likely communicate with you by mail to indicate whether it will accept less than it is owed. If the creditor approves, the creditor will agree to release the liens on the property. But you should also determine whether the creditor intends to waive its rights to any shortfall, or whether it intends to pursue you for the shortfall after closing. If the communication regarding this issue is at all unclear, it is very important that you contact the lender for clarification before continuing with the sale.
If you are in the process of foreclosure, it is important to understand that the process will continue even though you are pursuing a short sale. Typically, a foreclosing lender will not delay the foreclosure process because you have the property on the market or even if you have a purchase agreement signed. Therefore, you need to stay informed about your foreclosure process, and in particular understand the redemption period deadline that may apply.
There may be tax consequence to you as a result of the short sale. For example, if your short sale involves the sale of property that is not your primary residence, you will be taxed on any “forgiven” debt. Other rules apply; it is important that you contact a tax consultant before making your decision.
In Minnesota we have a longer redemption period than many states which can work in the favor of both the sellers as well as the buyers. It can take a long to get all of this sorted out, so know as much about the process going it. Believe it or not the more you know of your situation the easier it will be to make the right decision for you. Don't just jump into it without all the facts, the process is hard enough on a family already. By doing the research first it should ease the burden a bit.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
Short sale buyer information. Some facts you should know before making a decision.
I am continuing with short sales in many of my blogs due to the continuing confusion about them completely understandable. There seems to be so much misinformation floating around about them. Not to mention the amount of calls and emails I receive from both buyers and sellers wanting information. They usually begin with I heard from my friend or read some where about x, is that true?
Even though both sides of the transaction feels the pain of the whole thing, there are very different things to consider if you are a buyer vs. a seller. Below is a basic outline of what I typically cover with a buyer when we sit down the first time to discuss the buying process. The one thing you always want to keep in mind is every transaction is different and there are many unknowns that come up. That is something you can't control no matter how prepared you are.
When we are talking about a short sale, we are not talking about a bank-owned property. A short sale occurs when the proceeds of a home sale will not be sufficient to fully repay the seller’s creditors. Because the creditors cannot be paid in full, the seller will need to obtain an agreement from the creditors that they will accept something less than what they are owed. While it is possible to get a good deal on the price of a short sale property, there are a number of issues unique to short sales that are worth considering:
First and foremost, you typically need to have a lot of patience when trying to purchase via short sale. Even though you may have signed a purchase agreement with the seller, it will take some time before you know whether the transaction will close. It can easily take 30-60 days to get a lender to respond to a request for a short sale. It may take longer. And there are sometimes multiple creditors from whom approval will be needed. This can further extend the wait time.
Many short sales are not approved. Just because you might have the highest offer for the property does not mean that it will be approved by the lender. Many purchase agreements fail because the lender chooses not to approve the short sale or because the lender grants approval on terms unacceptable to the seller.
You could have expenses that are not reimbursed. For example, if you incur the costs of an inspection or an appraisal prior to creditor approval, you will typically not be able to recover those expenses.
Unless otherwise agreed in the purchase agreement, the seller may accept offers that come in after your offer. Just because you had the first offer that was accepted by the seller does not mean that you have a superior right to the property. All purchase agreements will typically be contingent on bank approval, and the bank will approve only one, normally the highest and best offer.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
Even though both sides of the transaction feels the pain of the whole thing, there are very different things to consider if you are a buyer vs. a seller. Below is a basic outline of what I typically cover with a buyer when we sit down the first time to discuss the buying process. The one thing you always want to keep in mind is every transaction is different and there are many unknowns that come up. That is something you can't control no matter how prepared you are.
When we are talking about a short sale, we are not talking about a bank-owned property. A short sale occurs when the proceeds of a home sale will not be sufficient to fully repay the seller’s creditors. Because the creditors cannot be paid in full, the seller will need to obtain an agreement from the creditors that they will accept something less than what they are owed. While it is possible to get a good deal on the price of a short sale property, there are a number of issues unique to short sales that are worth considering:
First and foremost, you typically need to have a lot of patience when trying to purchase via short sale. Even though you may have signed a purchase agreement with the seller, it will take some time before you know whether the transaction will close. It can easily take 30-60 days to get a lender to respond to a request for a short sale. It may take longer. And there are sometimes multiple creditors from whom approval will be needed. This can further extend the wait time.
Many short sales are not approved. Just because you might have the highest offer for the property does not mean that it will be approved by the lender. Many purchase agreements fail because the lender chooses not to approve the short sale or because the lender grants approval on terms unacceptable to the seller.
You could have expenses that are not reimbursed. For example, if you incur the costs of an inspection or an appraisal prior to creditor approval, you will typically not be able to recover those expenses.
Unless otherwise agreed in the purchase agreement, the seller may accept offers that come in after your offer. Just because you had the first offer that was accepted by the seller does not mean that you have a superior right to the property. All purchase agreements will typically be contingent on bank approval, and the bank will approve only one, normally the highest and best offer.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
Subscribe to:
Posts (Atom)