SHORT SALE MARKET EVOLUTION - GMAC SOLUTION TO FALSE BUYERS
BANKS HOLDING EARNEST MONEY FOR SHORT SALE WITH THE RELEASE TO THE BANK SIGNED IN ADVANCE BY THE BUYER AND SELLER????
I think not.
I'm not comfortable with the bank holding the earnest money because there is no assurance that they will follow the law with respect to earnest money if they, the bank, doesn't approve the contract.
To say that the banks lack a degree of credibility is an understatement.
If I'm holding the earnest money the RELEASE must be signed by the buyer and seller. Or, there are statutory remedies to get the earnest money back if the seller doesn't sign the release.
I have no problem with the check being deposited on acceptance by the buyer and seller while awaiting bank approval. That solved the problem of buyer's walking in my market in MD and VA.
Sending the money to the bank???? Not a good idea. When a contract is not approved by the bank, that buyer is out there looking again, or may have a home staked out. The question is how long will the return of the earnest money take?????
Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.
KUDOS to GMAC mortgage. Their new criteria for short sale consideration is that all contracts with buyers must have a clause that requires the deposit on buyer default to go to GMAC.
Here is the language GMAC wants if you have a short sale with them as the lender:
2-3% earnest money must be agreeable to buyer. Contingencies must be removed 14 days after we issue approval letter and earnest money becomes non-refundable. If buyer walks, buyer and seller must agree in writing that earnest money will be wired to GMAC.
This development is clearly an attempt to stem the tide of buyers that are in fact "false buyers", and to create real, binding contracts with penalties for walking away.
This is no new concept. In all traditional contracts for purchase and sale there are contingencies and once the contingency is met or waived, the buyer and seller are bound to the contract. This has NOT been the trend in short sale contracts and I have written about the frustrations it creates over a year ago in SHORT SALE BUYER CANCELED CONTRACT EPIDEMIC - DIAGNOSIS AND CURE and MULTIPLE SHORT SALE CONTRACTS AND HOW TO AVOID THEM.
The short sale market has been a remarkable opportunity to see the evolution of business models in the finance and real estate economies that often take a decade or longer to develop - but we are seeing it happen in months instead of years. It reminds me of seeing an entire planet evolutionary development be condensed from billions of years to weeks as in the movie Star Trek II: The Wrath of Kahn, where the Genesis project device creates an entirely new planet before our eyes. (See also the sequel Star Trek III: The Search for Spock).
The short sale market is not as exciting as the movie - but its evolution is, as Spock would say, remarkable.
Copyright 2010 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.
See our easy to understand articles at:
TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
Comments(15)