ATTENTION AGENTS: What is an "Arms-Length Transaction"?
Well, when you are talking about a Short Sale transaction, this means that the Buyer cannot be related to the Seller and neither can be related to the Real Estate Agents. So what does this mean for you? Let's say that your aunt is one of the best Agents in town. Of course you'd want her to sell your home, (or be your Buyer Representative), right?
More & more I am seeing the banks kill deals because it's not an arms-length transaction. It might have just happened to me today! (Of course, I'm not sure yet because bank reps seem to have a once-per-day limit of answering their phones) ...
Then I got the fax.You see, we've been working on the sale of my neice's home since August ... We clearly disclosed in the purchase agreement that "the Seller is related to the Listing Agent" and "the Buyer is related to the Selling Agent". We were told a month ago that our submitted offer was accepted, but had to go through additional approval via RHS (Rural Housing). Okay, we can be patient. And, luckily, the Buyer decided to hang in there too and get this deal closed, regardless of the delay. T
I was SO excited when the Short Sale bank called me this morning and said, "I have an Approval!" ... She proceeded to give me a list of a few minor things she would need. Things like an updated HUD-1 statement, updated paystubs, etc. ... pretty typical items, really. She said she would fax me with the detailed instructions to share with the title company & that as soon as she received those things, we could schedule closing. "Yay!", I thought to myself. I called the buyer's agent & my sellers to spread the good news.hings seemed to be progressing as usual for a short sale.
The first few pages looked like typical requirements, basically just like the bank rep had mentioned on the phone ... But the last pages had stamped on them: AFFIDAVIT OF ARMS LENGTH TRANSACTION MUST BE RECEIVED BACK BEFORE FINAL HUD WILL BE APPROVED. "NO EXCEPTIONS".
Uhm, excuse me?!
Had they not reviewed the purchase agreement that we had sent to them THREE months ago? Of course they had. They just didn't care. They don't care that an agent, (two in this case), spent months working their tails off for their clients. They don't care that if they can't make this offer work, there probably won't be another offer. They don't care that the home will end up in foreclosure and ultimately cost the BANK more money in lawyer fees & court costs. Not to mention loss of value when the home sits empty for several more months unnecessarily.
But is it really the BANK that doesn't care? No. It's the bank's short sale negotiator assigned to the file. Why would she/he care? It's the bank that is losing money, not the negotiator's own personal bank accounts dwindling.
I am sure we will find some type of resolution. That's what I do best. But I felt the need to share.
Hopefully you will not make the same mistake of thinking that just because you've disclosed a relationship upfront, the bank will pay you ...