This past week my office had 5 short sale buyer's walk from their contracts! Although I use an exclamation mark, it is not an unusual occurrence. In fact it seems that it takes 4 contact buyers to make a short sale finally happen. If that was an average for a traditional sale situation, Realtors and title agencies would be climbing the walls.
The general failure of short sale buyers to not close is the fault of the system created by the current finance and real estate sales market - but it needn't be. Just consider:
1. In a traditional sale, if there is a lien on the property does the Realtor negotiate to make the lien go away? Of course not. If there is a lien then the seller should get an attorney to clear the lien.
2. In a traditional sale the buyer is required to make a good faith reasonable deposit to escrow. Why on earth do we see buyer's making a deposit conditional on the lender accepting the "contract" (or whatever it is since there is no deposit). Why do we see $1,000 deposits for $300,000 contracts - that makes no sense either.
3. In a traditional sale the buyer makes inspections within a short period of time. In short sale contracts the "Effective Date" is when the Buyer is told the bank approved the contract for short sale. This encourages multiple contract offers by one buyer on several properties since any can be canceled for no reason shortly after lender approval. Inspections should be done in the traditional way - the cost is a risk to the endeavor by the buyer and the price offered should be part of the consideration of the offering being a "hard contract".
Lenders should encourage a change in conduct by rejecting outright any contract with post lender approval contingencies. That would vastly decrease the number of short sale buyer contracts that will never close - but increase the percentage of short sale contracts that indeed close!
Copyright 2009 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 find articles at Need Short Sale Information? - These Articles Probably Answer Your Question