In the sale of REO properties by banks (“REO” means “Real Estate Owned” by the bank, typically as a result of a foreclosure), many banks are insisting that their REO properties be sold using the FAR/BAR “AS IS” Residential Contract (hereinafter referred to as the “FAR/BAR Contract”). On the other hand, Realtors® primarily use the FAR Residential Contract, and, if the real property is being sold “AS IS,” they simply add the FAR As Is With Right to Inspect Addendum.

The FAR/BAR Contract was drafted and promulgated by a joint committee of The Florida Bar, representing Florida attorneys, and the Florida Association of Realtors® (“FAR”), representing Florida Realtors®. The FAR Residential Contract with an As Is With Right to Inspect Addendum (the latter Contract with its Addendum being hereinafter referred to as the “FAR Contract”) was drafted and promulgated by the Florida Association of Realtors® only. This article will attempt to compare and cross-reference the provisions of the FAR/BAR Contract to those of the FAR Contract. Remember, throughout this article, references to the FAR/BAR Contract and the FAR Contract refer to “AS IS” contracts.

Both the FAR and FAR/BAR Contracts are derived from their respective organizations’ regular residential contracts. In revising its regular residential contract, FAR simply provides an addendum to convert that contract to an “AS IS” contract. The FAR/BAR Contract actually incorporates the revisions into its standard residential contract, bolding the revisions to indicate where they are located within the contract. Both the FAR Contract and the FAR/BAR Contract delete the regular contracts’ limited inspections for, and seller warranties against:1 (1) termites

1 The FAR Contract’s Paragraphs 6 & 8(a) are deleted, and the FAR/BAR Contract’s Standard N is deleted.

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© 2008. Barnes Walker, Chartered. All rights reserved. E:MARKETINGFAR Contract v. FAR-BAR ContractFAR-BAR AS IS Contract Handout.doc* This summary is based on the 2/08 revision of the FAR/BAR “AS IS” Contract and the 4/07 revision of the FAR Residential Contract and “As Is with Right to Inspect” Addendum. Please note that these forms and the provisions they contain may be modified or revised after the preparation of this summary. and other wood-destroying organisms;2 and (2) the property’s structures, appliances, a/c,

electrical, and plumbing systems not being in “working condition,” as the latter term is defined in the Contracts,3 along with (3) deleting the seller’s monetary obligations to repair or remedy defects found by the inspections up to an agreed-upon maximum amount.4 Both the FAR and FAR/BAR Contracts replace these deleted rights with a general inspection right regarding any and every aspect of the subject property, although the FAR Contract has certain limitations on this right. In both Contracts, if the buyer is not satisfied with the results of the inspection, the buyer may cancel the Contracts and receive a return of the buyer’s deposit.

Following is Table 1, which is a table of key, deal-point provisions5 of both the FAR and FAR/BAR Contracts where the provisions differ from each other, with the table indicating how they differ. (Keep in mind that the parties can amend either Contract’s provisions to read as the other’s provisions do or in a completely different way). Table 2, also following, cross- references, between the two Contracts, where corresponding provisions are located in each Contract.

2 The FAR Contract’s Paragraph 8(b) is deleted, and the FAR/BAR Contract’s Standard D is deleted. 3 The FAR Contract’s Paragraph 8(a)(1) is deleted, and the FAR/BAR Contract’s Standard N is deleted. 4 The FAR Contract’s Lines 68-72 are deleted, and the FAR/BAR Contract’s Paragraph XII is deleted. 5 Minor differences or differences in legal “boiler-plate” provisions are not addressed here.

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Paragraph X:

The parties must choose one of these three options: (1) allowing the buyer to assign and be released from the Contract; (2) allowing the buyer to assign and not be released from the Contract; and (3) not allowing the buyer to assign.

Paragraph 14:

The buyer may not assign without the seller’s written consent.

Standard R:

In case of a dispute, the losing party has to pay the winning party’s legal fees &

No reference:

No such provision is included or resulting deterrence provided. All

costs. This helps ensure that parties abide by the Contract and do not initiate lawsuits without merit.

parties pay their own legal fees & costs.

Standard W(4):

Seller represents that seller has no knowledge of any repairs or improvements made to the property without compliance with governmental regulations, or building code violation notices that have not been already disclosed to the buyer. If the representation proves to be untrue, buyer can sue seller.

No reference:

Unfortunately, the F AR AS IS Addendum, by replacing Paragraph 8, deletes both: (1) seller’s requirement to prove that all building permits have been closed and all improvements permitted, and (2) the obligation to close out any permits found to be open or obtain permitting for any non- permitted improvements. The buyer, if the buyer discovers these problems, has only a right to cancel.

No reference:

A separate Addendum provision must be added regarding these requirements.

Paragraph 7(g):

The Contract contains a provision dealing with these requirements.

Paragraph VI:

In the event of extreme weather or other “force majeure” events, closing can be delayed until: (1) utilities are restored, and (2) building insurance is available, with (3) a time limit inserted by the parties, which, if left blank, is 14 days by default.

Paragraph 4 & 11(c):

1. If insurance underwriting is suspended at closing, the closing can be delayed until 5 days after the suspension is lifted.

2. Otherwise, all time periods, including closing, can be delayed up to 30 days for acts of God.

State or federal court for all disputes. Note, however, that most court systems require the parties to attempt mediation of their claims before trial.

Paragraph 16:

1. For deposit disputes, mediation first, then, as determined by the escrow agent, arbitration, a Florida court, or The Florida Real Estate Commission.

2. For all other disputes, mediation first, then arbitration in the county where the property is located.

Paragraph IV:

1. The contingency specifically defines whether the interest rate will adjust, the interest rate %, and the loan

Paragraph 3:

1. The contingency does not specifically define in advance what loan will be acceptable to buyer, so

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term, which then makes clear in advance whether the loan that is approved will be acceptable to the buyer and satisfy and eliminate this contingency.

2. If buyer receives loan approval, buyer must deliver written notice of loan approval to seller within loan approval period. If buyer fails to do so, seller can give buyer notice of 3 days to waive the contingency or the contract will be cancelled. Regardless of notice, if the loan is not approved, either party can cancel the contract. If the contract is cancelled as a result of buyer failing to obtain loan approval, buyer will receive the deposit, provided that buyer used due diligence in seeking the loan.

buyer has the right to reject any offered loan, no matter how attractive, and thereby cancel the Contract and receive a return of the deposit.

2. If buyer does not receive loan approval, buyer must deliver written notice of failure to obtain an acceptable loan to seller within the loan approval period. If buyer fails to do so, and the sale does not close, seller will receive the deposit.

No reference:

No such optional advice is provided to the buyer.

Paragraph 7(c):

The Contract contains this optional advice to the buyer.

Paragraph VI:

If force majeure conditions continue beyond time limit set by the parties, either party may cancel the contract. Who receives the deposit is not mentioned, but it is presumably returned to buyer.

Paragraph 11(c):

If force majeure conditions continue beyond 30 days, both parties are excused from having to perform and either party can cancel. Buyer will receive a return of its deposit.

Paragraph XIV:

This is a general inspection right of every aspect of the real property with no limits or restrictions.

AS IS Addendum:

This inspection right is limited as follows: (1) the inspections must be conducted by licensed professionals; (2) the buyer may not cancel unless the cost of repairs for discovered defects exceeds a certain monetary limit ($250 if left blank), and (3) written inspection reports and repair estimates must accompany any cancellation.

Standard L: 1. Taxes must be prorated based upon

the discount for early payment. 2. Any advance rent and security

Paragraph 5(d):

1. No such requirement for consideration of the early payment discount.

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deposits must be credited to buyer and charged to seller.

Other items listed are also subject to proration.

2. No such contract requirement, but landlord/tenant law requires a credit.

Other proratable items are the same.

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Standard Z:

Buyer and buyer’s successors & assigns waive all claims against the Realtor® for defects or damages that may exist at closing but are subsequently discovered. This is a somewhat limited protection.

Paragraphs 15, 16(b), 18, & 19:

1. The Realtors® are expressly entitled to receive 50% of the deposit if buyer defaults and the full commission if seller defaults.

2. If the Realtors® are a part of a dispute, the Realtors® must consent to arbitration.

3. Both parties expressly agree that the Realtors® have advised them to verify all representations and to seek legal and other professional advice.

4. Buyer agrees that the Realtors’® representations are based upon seller representations or the public records and agrees to rely upon other parties for verification of the property’ s condition, square footage, and value.

5. Both parties agree to indemnify the Realtors® against and release them from: (a) all expenses and costs, including those of attorneys, resulting from the parties’ Contract breaches or misrepresentations; (b) the Realtors’® performance of tasks beyond their scope of services; and (c) other vendor services, products, or payment.

6. The parties expressly direct the escrow agent to disburse the commissions at closing.

Paragraph VIII & Standard F:

The Contract covers: (1) the required disclosure of the terms of any existing lease, tenant estoppel letters, and other relevant lease matters, and (2) any occupancy of the property by the buyer in advance of closing.

No reference:

A separate, but more comprehensive, F AR Rental Addendum must be attached, which covers these issues and more.

Standard O:

If the property is damaged by casualty and repair costs do not exceed 1.5% of

Paragraph 9:

If the property is damaged by casualty and the repair time does not exceed 45

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the price, seller must repair and buyer must buy. Otherwise, buyer may: (1) cancel and have its deposit returned, or (2) take the property AS IS with a credit for the 1.5%.

days, seller must repair and buyer must buy. Otherwise, buyer may: (1) cancel and have its deposit returned, or (2) take the property AS IS, and seller must credit the deductible to buyer and assign any unexpended insurance proceeds to buyer.

Standard B:

The Contract provides provisions for seller financing.

No reference:

A separate Seller Financing Addendum must be added.

Standards W(2) & Z:

1. Seller makes no warranty or representation regarding the physical condition or history of the property.

2. Buyer and buyer’ s successors & assigns waive all claims against the seller for defects or damages that may exist at closing but are subsequently discovered.

AS IS Addendum:

Seller makes no warranties, except marketability of title.

Paragraph XI(a):

Regardless of whether the assessment is certified, confirmed, ratified, pending, or payable in installments at the time of closing, the parties simply agree on whether seller or buyer will pay.

Paragraph 5(e):

If the assessment is certified, confirmed, and ratified, seller will pay. Otherwise, the buyer will pay.

Standard C:

The survey must be obtained and reviewed within 5 days after the time allowed for the delivery and examination of the Title Commitment.

Paragraph 10(c):

The survey must be obtained and reviewed prior to closing.

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Standard I:

Time periods of less than 6 days do not include Saturdays, Sundays, or holidays.

Paragraph 11(b):

Standard A:

Seller has 30 days to cure, but buyer has the ability to extend the Curative Period for another 120 days or less, within which time seller must continue to attempt to cure.

Paragraph 10(b): Seller has 30 days to cure.

Paragraph V & Standard A:

The parties insert how many days (but not less than 5 days) prior to closing the Commitment must be delivered.

Line 250:

The Commitment must be delivered 10 days prior to closing.

Paragraph V:

If seller pays the premium, seller selects the title agent. Conversely, if buyer pays the premium, buyer selects the title agent. The parties must agree on the option of who pays.

Paragraph 5(c):

The provision is the same, except there is a third option whereby buyer selects the title agent, but seller pays the premium.

Paragraph VII:

In addition to other matters, the buyer is required to take title to the property subject to “unplatted public utility easements of record (located contiguous to real property lines and not more than 10 feet in width as to the rear and front lines and 71⁄2 feet in width as to the side lines).”

Paragraph 10(a):

No such requirement, but the other matters to which the buyer takes subject are the same.

Standard Y:

The Contract contains a provision dealing with this requirement.

No reference:

A separate 1031 Exchange Addendum must be added regarding this Internal Revenue Code requirement.

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Paragraph III(a)

Lines 403 – 407

Paragraph III(a)

Lines 408 – 411

None

Paragraph 16

Paragraph X

Paragraph 14

Standard R

None

Standard W(4)

None

Standard K covers both sellers’ and buyers’ costs.

Paragraph 5(a) for sellers’ costs. Paragraph 5(b) for buyers’ costs.

Paragraph VI

Paragraph 4

Standard H

Paragraph 5

None

Paragraph 7(g)

Standard K, Line 207

Paragraph 5(a), Line 65

Standard U

Paragraph 10

Standard S

Paragraph 15

Paragraph VI

Paragraphs 4 & 11(c)

Paragraph XI(b) Paragraph XI(c) Paragraph XI(e) (add lead-based

paint rider for pre-1978 homes) Paragraph XI(d) Paragraph XI(h) Paragraph XI(g)

Paragraph 7(b) Paragraph 7(f) Add separate FAR Lead-Based

Paint Addendum Paragraph 7(a)

Paragraph 7(e) Paragraph 7(d)

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Standard W(1)

Paragraph 7

Standard S

Paragraph 16

Paragraph III(b)

Paragraph 11(a) & Line 424

Standard Q

Paragraph 17

Paragraph IV

Paragraph 3

None

Paragraph 7(c)

Paragraph VI

Paragraph 11(c)

Paragraph XI(f)

Paragraph 5(f)

Paragraph XIII

Paragraph 5(g)

Paragraph XIV

AS IS Addendum

Standard X

AS IS Addendum

Standards T & V

Paragraph 13

Standard T

Paragraph 12

Paragraph VIII

Paragraph 4, Line 55

Standard L

Paragraph 5(d)

Lines 148 – 151

Paragraph 19, Lines 362 & 363

Standard Z

Paragraphs 15, 16(b), 18, & 19

Paragraph VIII & Standard F

None

Standard O

Paragraph 9

Standard B

None

Standards W(2) & Z

AS IS Addendum

Paragraph XI(a)

Paragraph 5(e)

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Standard C

Paragraph 10(c)

Standard I

Paragraph 11(b)

Standard I

Paragraph 11(a)

Paragraph V & Standard A

Paragraph 10(a) & (b)

Paragraph V

Paragraph 5(c)

Paragraph VII

Paragraph 10(a)

Standard X

AS IS Addendum

Standard Y

None

* Corresponding provisions whose locations are similar or obvious, or that address legal “boiler- plate” issues, are not included in this table.

If you have any questions, please do not hesitate to contact us at 741-8224. Sincerely,

Garret T. Barnes Adron H. Walker

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I am proud to announce my new buyers specialist Della Carson. She is an outstanding agent. She specializes in manatee county real estate.  She will give you information on bradenton foreclosures , Hernando County foreclosure listings , and any other active bradenton mls search.

This Short Sale 101 Seminar is designed to briefly discuss and summarize some basic aspects and considerations of a Short Sale loan workout.

A Short Sale means the seller’s lender is accepting a discount of the loan payoff to release an existing mortgage to allow a sale to occur. Typically, a seller most likely needs to be in default and have stopped making mortgage payments before a lender will consider a short sale. Just because the seller is requesting a Short Sale from seller’s lender(s), it does not mean the lender(s) will accept the Short Sale terms. In the Short Sale scenario, the mortgage payoff exceeds the contract price, and the lender may either forgive all or a portion of the debt and release its mortgage lien on the property, therefore allowing the sale to occur or the lender can agree to release its mortgage on the property and not forgive the deficiency, but have the seller sign a new promissory note for the balance or, in the alternative, the lender can do a combination of the two.

If a seller is in trouble with a particular loan on a particular piece of property, the seller, depending on the seller’s ability, can:

(1) reinstate their mortgage; (2) arrange a loan workout or re-payment plan; (3) pay off the loan in full; (4) refinance the loan; (5) allow a foreclosure to occur (do nothing); (6) do a deed in lieu of foreclosure, or lastly; (7) declare bankruptcy.

A Short Sale may or may not be the best deal for the seller or the buyer and the Realtor should always recommend a credit, legal, and/or financial advisor to help the Realtor’s client evaluate the options available and to determine whether there are any other factors that may be positive or negative for their current circumstances. The ideal candidate for a Short Sale is still making loan payments and has a credit rating worth preserving.

Short Sales do allow a closing to occur and, therefore, a commission to be paid. A Short Sale also allows the seller to sell the property upon its own terms, subject to the lender’s consent, and possibly includes forgiveness of the deficiency amount. The effect of a Short Sale on a seller’s credit report is much less damaging than a foreclosure, deed in lieu of foreclosure, or bankruptcy, since the negative entry on the credit report shows up as a pre-foreclosure and redemption matter, rather than a deed in lieu of foreclosure, or a foreclosure itself. The lenders do not wish to pursue a foreclosure or seek a deed in lieu of foreclosure because they do not want the property back, which would be the result of such a foreclosure or deed in lieu. They do not want the property back because they incur considerable costs in marshalling, restoring, maintaining, re-marketing, and selling the property. The lender is more apt, in this day and age, to work with a seller in a Short Sale or other workout situation, as it is better for the lender. In addition to a Short Sale having a less negative impact on a seller’s credit rating, a seller who participates in a Short Sale can quickly sell a piece of property and cut its cash outflows and liability and/or invest in other properties in a quicker manner than they could in the aftermath of a foreclosure. The listing broker is also helping a seller who has financial problems as well as earning a commission. Buyers benefit because they can typically purchase a piece of property for less than fair market value and contract directly with the seller subject to the lender’s approval, which means the buyer has some control of the property. If the property went through a foreclosure, a buyer would just typically be one of the bidders on the foreclosure steps or would have to wait a lengthy period of time while the foreclosure proceeded and negotiate with the lender’s Realtor, and, meanwhile, the property would be falling into further disrepair.

There is no universal set of rules or set process regarding a Short Sale, and each lender performs their Short Sale process differently. However, there are some basic general steps that can be expected and considered:

(1) The seller has to prove the seller is experiencing some financial hardship or other type of hardship and will be unable to continue making loan payments. In most cases, the lender will want to see that the seller has been in default. A lender will require the seller to provide a specific package of information regarding tax returns, financial statements, bank statements, and pay stubs; complete a loan application; provide title report; and possibly prepare a draft settlement statement, as well as sending a marketing plan from the Realtor, which will be submitted as a Short Sale application package along with the real estate contract.

(2) The lender has to determine the value of the property. Once a seller has proven a hardship as set forth above, then the seller has to demonstrate that the property is worth less than the total amount that is owed to the seller’s lender and other lien holders. The lender may require a broker’s price opinion, a comparative market analysis, or, even in some cases, an appraisal of the property. The seller will be responsible for the costs of these items. 

(3) The seller has to find a buyer and enter into a contract because, without a contract, a Short Sale cannot occur. Each lender of the seller has to approve the contract and the Short Sale process in order for a closing to occur. Most lenders will not even consider a Short Sale process until a contract is submitted.

(4) Final approval from all lenders must be obtained in order for the closing to occur. This includes negotiating the amounts that are to be repaid at closing in order for each lender to release their liens and therefore make the property marketable for sale to the buyer. Most lenders have specific departments and personnel to handle these Short Sale processes and negotiations, and, most of the time, authorizations must be obtained from several different levels of a lender’s management to receive final approval. A final approval must be obtained in writing from each lender in order for the closing to proceed to completion.

(5) All parties have to allow the lender a reasonable time to review and approve or disapprove a proposed Short Sale. Every Short Sale lender has different procedures, and therefore their time frames are all different. It typically takes a minimum of sixty (60) to ninety (90) days to obtain approval from a Short Sale lender; however, if there are multiple lenders, it could take longer because further negotiation is necessary. You as a Realtor can help your seller expedite the process by assisting the seller to prepare a Short Sale package for the lender that is complete. The longer the seller waits to send the package to the lender, the longer it will take to receive the final approval. The purpose of the package is to make sure that: (a) the reason for the default was unavoidable, involuntary, and beyond the seller’s control; (b) the seller has truly experienced financial hardship; (c) the seller will not earn enough money to pay the deficiency in installments over time; and (d) the seller does not have enough money to pay some or all the deficiency in a lump sum. Some short sales are very frustrating in the time it takes to complete them. Therefore, create reasonable expectations with the buyers and sellers up front that a Short Sale is a time-consuming matter, since the seller and Realtor must deal with lenders that are outside of the seller’s control. Again, setting reasonable expectations up front is important. Remember that the lenders are all experiencing a large volume of Short Sale approval requests, and this adds additional time to the final approval process.

(6) The seller and the Realtor must work hard and be patient but persistent because lenders are not only reluctant but also overwhelmed. It is important to follow-up with every document, every submittal, and every other action. Let them know the sale needs to happen as quickly as possible. You and your seller want to make sure the right people get the right information and want to “bug” them for approval without annoying them. It is important to set the contract up with the right time frames so as not to allow the buyer to back out too early. This would be very frustrating for you and the seller, since both of you would have spent considerable time, money, and effort.

Buying a piece of property through a Short Sale may be a good deal, but it is not always the case, and you must inform your buyer of such. First, there is no assurance that the seller will obtain final approval, although the buyer is obligating himself/herself to purchase the property during the period of time allowed in the contract to obtain approval of the Short Sale. Therefore, the buyer has to be patient and acknowledge that they may be precluded from making offers on other properties until such time as the closing occurs on the Short Sale property or the Short Sale contract has been properly terminated. This is not a good scenario for a buyer who needs to purchase a property immediately. Additionally, with the extra time that it takes for lender approval, other factors may come into the picture that may cause a termination of contract, such as judgments against the seller, the buyer’s loan’s interest rate lock expiring, or the seller filing bankruptcy. Another consideration is that the buyer’s remedy in case of a seller default under a Short Sale contract is most likely only the return of buyer’s deposit, as the seller is, in all likelihood, insolvent and has no money, thus precluding buyer from obtaining seller’s specific performance of the contract. Therefore, it is most important that the deposit be escrowed with a well-known escrow company, title company, or attorney. Being a “good” buyer (i.e., making a good down payment, having good credit, and being able to close quickly) is also a plus from the perspective of a lender considering the approval of a Short Sale.

As set forth above, a seller has many different options other than a Short Sale in case the seller finds itself in a hardship or in a default situation. This seminar just evaluates a Short Sale. Short Sales are not necessarily good for all sellers from a tax or financial perspective, so you have to urge the seller to get professional tax advice or financial advice regarding its particular situation. The seller’s credit will be affected by a Short Sale, but not nearly as much as it would be by a foreclosure or a deed in lieu of foreclosure. The seller may also be liable for income taxes on any deficiency that the seller’s lender forgives after the short sale has occurred. The seller’s lender may not forgive any of the debt deficiency, and the seller then will be liable for said deficiency amount after closing. The lender, in its sole discretion, determines whether or not it will pursue a deficiency judgment. (At the printing of this outline, Congress has passed, and the President has signed, into law limitations on, and, in some cases, elimination of, income taxes owed on forgiven deficiencies. I will attempt to have details on this new law at the time of this seminar.) Additionally, there might be other tax consequences relating to a Short Sale, such as capital gains taxes, even though the property is sold for less than the mortgage debt owed on the property, provided it is not the seller’s principal residence. (For example, in 1990, property is purchased for $100,000 with a $75,000 mortgage loan. By 2005, it has appreciated to $300,000 in value, and, at that time, seller refinances and obtains a new $250,000 interest-only mortgage loan. Unfortunately, in 2007, the property’s fair market value drops to $200,000, at which price it is sold. This sale is a Short Sale because the $250,000 mortgage debt exceeds the property’s price of $200,000. However, since the property is being sold for $200,000 and was originally purchased for $100,000, there is a long-term capital gain of approximately $100,000, upon which capital gains tax is owed.) I strongly urge Realtors not to give any tax or financial advice. The seller must understand that it requires a lot of work to obtain a Short Sale approval, and the seller must be willing to devote the necessary time and effort. If your seller is not willing to do a lot of work, then it is not worth your time. The Short Sale process is also less public, thus, possibly less traumatic for the family.

The listing broker that takes on a Short Sale transaction must be aware that a Short Sale can pose hidden difficulties and risks to the listing brokers, which include: (a) the potential loss of commissions on Short Sales that are not approved or otherwise fail, (b) the extensive time that Short Sales require, which may, again, be for naught, (c) marketing costs that are lost on failed Short Sales, etc. A listing broker that holds himself or herself out as handling Short Sales for sellers also incurs additional liability, if, as result, a seller relies on the listing broker as an expert, whether rightly or wrongly. There is also additional liability for the listing broker should the broker assume additional duties to prepare a seller’s personal financial statements, loan applications, and other documents required as a part of the Short Sale package. I would strongly suggest that you merely assist the seller to gather seller’s personal and financial records to be inserted in the Short Sale package. It is also important for the listing agent to obtain the authorization and consent from a seller so the listing agent can communicate directly with the lender to follow up during the approval process. Due to privacy concerns and any potential liability relating to inadvertent disclosure of the seller’s financial information, all confidential, financial, and private information provided in the package to obtain Short Sale approval should be disclosed to, and approved for release by, the seller, and not be provided to the buyer or the buyer’s Realtor. Additionally, make sure that the seller is negotiating with the lender’s final decision maker. The amount and payment of the commission is a specific concern in that the commission may be reduced in negotiations with the lender or may be reduced by court order or mandate. Therefore, it is very important for the listing Realtor to put in the MLS listing and the contract that the sale of the property is a Short Sale, and that, if the commission is so reduced, each Realtor’s share will be proportionately reduced. If this provision is not inserted in the listing agreement and the lender requires that the commission be lowered, then the cooperating broker could demand its total share of the commission, and therefore, the listing broker would get stuck with the short end of the stick. There is a fairly good percentage of Short Sales that are not successful, and there is a high risk that you will spend a lot of time and money marketing, negotiating, and working with the seller, all of which will be wasted. You have to analyze the probability of success for each Short Sale. For example, if a property has three or four mortgages and the likely contract price will be half of the total amount owed, pursuing the Short Sale is probably not worth your time. I also highly recommend that you add a clause to your MLS listing that says: “Please contact listing broker prior to submitting an offer on this property, as this sale will be a Short Sale and its ability to close will depend on the approval of the seller’s lender.” This clause will, first, provide the required disclosure of the Short Sale and will, second, allow you and the other Realtor to consider the probability of the transaction’s success based upon the contract terms being discussed.

The cooperating broker who represents the buyer in a Short Sale transaction has to disclose to the buyer that there is some risk of the closing not occurring, but, nevertheless, the client is obligated to purchase the property until such time as the contract can be properly terminated. This means that, during this time, the buyer will not be able to enter into contracts to purchase other properties despite the fact that they may desire to do so. The cooperating broker also may be forced to take a lower commission than it desires due to lender or court requirements and/or mandates. The benefit of a Short Sale is that it can provide the cooperating broker with a very desirable property at a good price for one of the cooperating broker’s buyers. This will surely result in a repeat client when that buyer is in the market to sell or purchase again. The biggest pitfall for the cooperating broker is the risk of loss of the broker’s commission, since there are a lot of contingencies in the contract that must be met as far as the seller and the seller’s lender are concerned.

(1) Prepare early. Call each lender and get their Short Sale procedure so the seller can see the requirements and get working on them.

(2) Because the seller is most likely in a stressed emotional state, you need to use a delicate sales approach to persuade the seller to commence the Short Sale procedure, while firmly keeping the seller focused on completing and submitting the Short Sale package paperwork and working on the follow-up that is required. Also, tell the seller to deal honestly with the lender.

(3) Have the seller send a brief letter to all mortgage holders, giving the seller’s permission to speak with you as the Realtor. Otherwise, privacy laws will prevent them from speaking with you. It is critical to build a relationship with the seller’s lender(s) because, once you gain creditability with the lender(s), the entire process becomes easier.

(4) Be sure to contact the correct department of the lender. Most of the time that will be the bank’s loss mitigation department, and usually not the customer service department or the collection department. Finding the correct decision maker is the biggest initial challenge in Short Sales.

(5) In helping the seller prepare their package, be careful about discrepancies between seller’s income and assets reported in the Short Sale package and the income and assets originally reported to obtain the current mortgage loan, as a big gap may indicate mortgage fraud unless employment or financial circumstances have drastically changed.

(6) Please note that the contract on the Short Sale property is a legal, binding contract once the earnest money has been deposited and the contract is fully executed. Without language in the contract stating that this is a Short Sale, conditioned upon the lender approving the contract and releasing all liens on the property, the seller may face legal problems for failing to perform their duty and obligation under the contract to convey to the buyer the property with marketable title if the Short Sale is not approved.

(7) It is important to find a buyer that is willing to be patient, has a reasonable deposit to escrow, has good credit, and is willing to close quickly after lender approval. I would have all buyers pre-approved for a mortgage before submitting an offer.

(8) When the listing Realtor offers compensation through MLS, make sure there is a note that the gross commission may be reduced proportionately, as the transaction will be a Short Sale subject to lender’s approval and direction.

(9) Use an “As Is” contract with right of inspection and have buyer complete all inspections early as you do not want to do a lot of work to have the buyer cancel at the last minute. Additionally, and probably more important, using an “As Is” contract does not obligate seller to put any more money into the property.

(10) Always put a clause in the MLS listing stating the transaction is a Short Sale and always use the Short Sale Addendum to the listing agreement.

For more information about Spring Hill Florida short sales contact us today.

 

When you decide to buy a home in Spring Hill Florida or the surrounding areas, your search for real estate and a mortgage should start and end here.  With so many lenders and Realtors to choose from in the Spring Hill and Manatee County area as well as nationally, you need to choose someone you can trust to find the house and  mortgage loan that’s best for you.

 

Sure, there are dozens of Realtors In Spring Hill and big bank mortgage lenders nationally, but you need a Realtor and lender in Spring Hill with local expertise and knoweledge.  Why?  Because we know the Spring Hill Market and the surrounding areas of Manatee county.  We know the local REALTORS®, appraisers, inspectors, and so much more.  We also have state-of-the-art technology that makes the Home Buying Process as easy and fast as possible, all while delivering personal customer service that can’t be beat. That is why we created this website to make it easier than ever to Search the MLS in Manatee County. You can also search the MLS in any surrounding areas as well. Don’t gamble your family’s largest investment with an inexperienced agent and lender.  Choose The Florida Sales Team , the Spring Hill Real Estate and Mortgage Experts.

 

 

We’ll help you find the perfect home for you and your families needs. When it comes to Real Estate in Manatee County Patrick DeFeo at Agent Trust Realty and Steve Fingerman at Hernando County Mortgage Lender are your friend in the business.

 

 

We help Investors in Spring Hill, Manatee County and all surounding areas find the right Real Estate at the right price point to ensure a sucessfull turn over or maximum cash flow possible. We are your best source for Investment properties in Manatee County and all surrounding areas