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Buyers and Sellers come to terms with their Northern Virginia Short Sale Contract. In the contract dated May 5th, they agree to the price and to make the settlement date in the regional sales contract on or before September 10th. The Short Sale Addendum reads that the Buyers will allow the Sellers until August 10th to deliver Short Sale Approval and they will be settle 30 days after the approval has been delivered to them. 
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13 Comments on Northern Virginia Short Sale Quiz: Question #3
Hi Chris Ann: If they agreed that they'll settle within 30 days of short sale approval then they would have to settle by July 5th.
Love the quiz idea btw!
July 5th is the answer, but the real answer is when buyer and seller can really perform and if that time is before the expiration of the approval letter. Keep in mind that in a short sale, the liability of a transaction between buyer and seller is usually ZERO so contract dates do not usually matter.
The answer is C) July 5th.
The date set in the regional sales contract is a suggestion and overriden by the Short Sale Addendum. Because the Short Sale Approval Letter allows settlement to occur on or before July 30th, the parties could execute an addendum superceding the Regional Sales Contract and the Short Sale Addendum to make settlement or or before July 30th. However, if those changes are NOT made, the date would have to be on or before July 5th.
Andrea: Glad to see you had the right answer.
Satar: I've got one right now where I represented the Seller and the Buyer didn't get this concept of settlement date. And because they thought it really didn't matter because it was a Short Sale, there is now a legal dispute between the parties. When in doubt, follow what is written in the contract. There is nothing that backs you up in a legal proceeding if you don't go by the written agreement.
I understand, but there is nothing you can do as either buyer or seller. In your shoes, if the buiyer is not capable of or willing to perform on time, it's time to change the approval letter to reflect the backup buyer. What is the buyer going to do? Sue the seller? Usually the seller does not have any assets in which would motivate the buyer to incur the cost of a lawsuit. The seller cannot profit from a real estate transaction. So they are not entitled to the buyer's deposit. The concepts of contracts are nice, but the reality of the situation makes both parties "judgement proof".
Satar: It's not so cut and dried. The Seller IS beng sued for something the Buyer couldn't do...settle. We called the Short Sale Bank to extend the letters for the third time and they refused. We had no back-up buyer. Because there was no sale, the Seller's attorney believes the Seller is entitled to EMD. The Buyer can't profit when the home SELLS. In the case of a Buyer who defaulted, there's no sale. It's a mess, but could've been avoided by the Buyer if they just gotten their appraisal done and financing approved in a timely fashion. It's unreal what the understanding of what SHOULD have happened in terms of settlement date, and the inspiration for this question.
Reading and understanding every word of a contract is important....
The most frustrating aspect of this is Buyers who should NOT be purchasing short sales in the first place if they don't understand the concept of when they are going to be expected to perform. This is not a regular sale, they don't have the leverage they seem to THINK they have and they need to understand when the bank says, "go," they need to pass Go. And they aren't going to collect $200, either. ;-)
Marilyn: And knowing that addendums supercede the original terms of the contract that they address.
Susan: Love the Monopoly analogy. And you're absolutely right. If a buyer can't hit the ground running on approval, they are buying the wrong house.
Yeah! I got this one without a second thought. You really have taught me well, you know. Plus, this series of blogs/questions has put me over the 60,000 point in AR! Thanks again!
Pam: Congrats on that 60,000 milestone. There are many more to reach so keep on commenting and posting.
Chris-Ann, ironically, I just received a request from the negotiator passed on by the listing agent for my clients to write an extension to the proposed closing date. "They are almost ready" - whatever that means. The kicker is that we added to the proposed closing date "within 30 days of receipt of written short sale approval".
... made me think of you :-)
Andrea: Ultimately, in our state, the settlement date in the contract is what keeps the contract alive. The addendum overrides it, but only if you are not past the original settlement date.