When you enter into a contract with a seller that is "short selling" their house, you have a place in the Virginia Regional Sales Contract to add a "Short Sale Contingency Addendum to Sales Contract". What is a short sale you ask? A short sale occurs when the seller's proceeds are less than necessary to pay off the outstanding balance of liens secured by the Property (ie. mortgage(s)).
When you put an Earnest Money Deposit (EMD) on a property, usually that money is deposited upon contract ratification, or when all parties have come to a meeting of the minds (signed off on all the terms of the contract). With a short sale you have to choose when you deposit your EMD.
You normally have two choices:
1. Deposit your EMD upon contract ratification.
2. Deposit your EMD upon written evidence of approval of short sale by seller's creditors (or 3rd party approval).
Why would you choose one or the other? There are always so many different circumstances with writing a contract that may affect the outcome of whether your contract is accepted by the seller.
If yours is not the only offer on the property and you are committed to waiting for 3rd party approval, choosing to deposit your EMD at ratification may make the seller feel that you are more serious and committed to seeing the transaction through to the end. It may be the one thing that sets you apart from the other contracts they are reviewing. But, it can be time consuming to get your check back if the offer doesn't get approved by the bank(s).
Some people don't want their money held up for months on a trasaction that may never happen, so they may choose to deposit the money upon written evidence of 3rd party approval. The check is still held by one of the parties, but isn't actually "cashed" and deposited until that time. If you don't get 3rd party approval, the check is simply returned to the buyer.
If you are thinking about writing a contract with your agent on a Short Sale Property, make sure you have them explain all of the options you have concerning your EMD.
If you are looking for a home and don't have a Realtor, give me a call. With the number of short sales on the market today, there is a good chance you may be writing an offer on a short sale property and you will need a Realtor to help you through the process. I would love to be that Realtor!
Your housing needs are my Priority!
Pam Stangler, Long & Foster Realtors, 305-433-1036 or pamela.stangler@LNF.com
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