The short sale addendum is evolving again - this time the Florida Association of Realtors has done an excellent job of fixing the shortfalls of their previous two versions that were harshly criticized by me when they were published. Key elements of the "fix" that came out in September 2012 include allowing a choice of when the property inspection period is to occur and finally recognizing that a mortgage release alone is not necessarily a waiver of a deficiency of the promissory note.
My criticisms and copies of the previous two versions of the FAR short sale addendum forms are contained in these two blog articles: SHORT SALE CONTRACT ADDENDUM FOR 2010 - THE GOOD AND THE UGLY and WHAT'S WRONG WITH THE FAR SHORT SALE LISTING AND CONTRACT ADDENDA - AND HOW YOU CAN FIX IT
Let's look at the two major issues that are now properly addressed.
1. The new FAR short sale form provides that the a "short sale approval" that does not provide for an approval of the proforma HUD, a reduced payoff and a release of both the mortgage(s) and a release of Seller from any deficiency claim under the mortgage and note(s). This was a major objection to the previous FAR short sale forms, and reflected I think, a failure by the FAR to understand the actual workings of the promissory note and the mortgage obligation. I further discussed this important distinction at MORTGAGE IS NOT AN OBLIGATION TO PAY - COMMON MISTAKEN ADVICE BY AGENTS.
2. We have found that the property inspection clause in the standard real estate contract has been the reason - at the last possible moment - to cancel the contract. Often this is done by a buyer (typically for purpose of investment) that has made several concurrent offers on properties and will accept the first to get short sale approval. Getting a buyer that was serious has been addressed by this writer in a previous article years ago - but is still relevant today. See SHORT SALE BUYER CANCELLED CONTRACT EPIDEMIC - DIAGNOSIS AND CURE. The new FAR short sale form has a "check the box" solution in the time calculation paragraph that usually involves the "Effective Date". Those can now include the time to make the initial deposit (a major failure of the previous addendum), and the inspection period.
Selecting the correct short sale addendum for your client (whether buyer or seller) is a critical element of representing a party in a short sale attempt. Understand the agreements you have at your disposal.
Here is a copy of the new form:
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© 2012 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 TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
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