What is a Short Sale?
A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the current borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrower. Further, the lender may accept a short-sale in favor of the possibility of the borrower filing for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy protection and therefore staying a prolonged period in the subject property for a longer duration of time and not being responsible for the mortgage deficiency.
Short Sale Considerations
1. In a traditional sale of real estate items such as the washer and dryer, refrigerator, ceiling fan and lighting fixtures are usually included in the sale of real property. Said items are known as Personal Property and Fixtures and are not always included in a short sale and careful consideration must be made to the Contract for Sale.
2. In a Short Sale addendum to a Contract For Sale of Real Estate, the short sale is generally contingent upon upon the approval of the short sale by the lien holders or mortgagees within 60 days after review period.
Positives: The time frame can always be extended, however ALL parties (buyers and sellers) must agree. Only two months are spent trying negotiate and the buyer and seller may move on if the short sale is not timely approved.
Negatives: If a potential short sale buyer’s house does not sell and settle within a short period of time then a short sale buyer is bound to purchase subject short-sale property per contract. Sixty days is a relatively short period of time for a short sale to take place, at the parties are at the mercy of the seller’s attorney, lien holder’s and seller’s cooperation to submit documentation in a timely fashion to the mortgagees for short sale approval.
3. A Short-Sale Contract is usually an “As-Is” contract which means that no defects, known or unknown will be fixed at the seller’s expense, however, the buyer is usually privy to a full home inspection to determine structural and other possible defects in the real property.
4. Buyers’ potential new mortgage lender may want a home inspection completed prior to approving a mortgage commitment, however, under a typical short sale Contract, a home inspection may not be obtained until up to 10 days after short sale is approved. Meaning, a short-sale buyer may be bound to buy a house that has not yet been inspected by a home inspector of their choice prior to the Contract becoming enforceable. Short Sale contracts are usually “As-Is Contracts” however, a potential short-sale buyer would most likely prefer to have an idea of the extent of the “Is” part. Suggestion, amend the inspection clause to read “At buyer’s request a home inspection may be obtained after the Contract is signed by both parties (buyer and seller).” Therefore no revelations surface regarding the condition of the subject short-sale property as settlement approaches.
If there are any general questions or topics you would like to read about relating to bankruptcy law in the Philadelphia, Pennsylvania region, you may contact the Philadelphia Bankruptcy Lawyers at Sadek Law Offices, LLC at 215-545-0008 or email firstname.lastname@example.org. Thank you.