A buyer sent me an email asking me to write up an offer on a short sale we hadn't looked at. She said she didn't need to see it; she had been watching it closely for a long time and just wanted me to write up her offer and submit it. It is in a tiny little town about an hour from Coeur d'Alene and really down in the boondocks.
Before I did anything I wanted to talk to the listing agent and find out what the short sale situation was. We had a long talk, he told me about the seller’s situation, and confessed he didn't know anything about short sales. And I'm here to tell you, he was right. He didn't know ANYTHING! I spent at least a half hour talking with him, and he agreed to visit with his seller about giving me authorization to work the short sale as the buyer's agent.
I called my buyer with the good news. I started filling her in on the details, and she started correcting me. Huh? Hmmm. I asked her, "This isn't your ex-husband's home is it?" She said no, and after a long pause confessed that it was her son's place. "That's not going to be a problem, is it?"
Well, yes, it's a big problem. Why? Because a short sale purchase must be an ARM'S LENGTH TRANSACTION.
ARM'S LENGTH TRANSACTION:
A colloquial description of a transaction where none of the parties are related to each other or have common interests -- they have each other at "arm's length". An arms-length transaction is generally at fair market value; in a "non-arm's-length" transaction, the relationship between the parties may cause one or the other to accept less than they are entitled or pay more than fair market value.
In the case of a short sale, all parties - Buyer, Seller, Listing Broker, and Selling Broker - are required by the Creditor who is approving the short sale, to sign forms stating that this is an ARMS LENGTH TRANSACTION. Simply put, this means that none of these parties is related to any of the others, or has any other undisclosed interest in the property.
My buyer felt bad and apologized profusely. She had no intention of trying to do anything underhanded. She just didn't know. And our search is still on for her perfect home.