What Is a Short Sale Addendum?
A short sale is an agreement between a lender and a homeowner to accept a settlement of his account for less than what he owes, pending a successful sale to a new borrower on his property. Short sales are governed by a different set of rules in comparison to other real estate transactions and require special paperwork due to the nature of the transaction. One of these items is a short sale addendum to the purchase agreement.
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Seller Protection
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A short sale addendum protects the seller from impending foreclosure by stating that he understands the home is to be purchased at short sale. It states that the seller will not receive or retain profit from that sale in exchange for avoiding foreclosure proceedings and judgments that could occur therein, and agrees to convey clear title to the buyer.
Lender Protection
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A short sale addendum protects the lender's interest in allowing it to accept backup offers for the property. This allows the lender to set up a bidding process for the property, wherein only the highest and best bid is accepted. It also absolves the lender of any liability for repairs to the property or other seller concessions.
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Buyer Protection
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Short sale addendums also protect the interest of the buyer in the property. There is a clause in the short sale addendum that allows the buyer to walk away from the transaction in the event that the lender is taking too long with a reply; the buyer is not locked into a purchase contract until all terms are accepted and executed by the lender according to the buyer's wishes.
Time Frame
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A short sale offer and addendum will need to be reviewed by a lender prior to final acceptance. This can take a few days or a few weeks, depending on any other offers on the property.
Geography
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Formatting of short sale addendums and the legal language therein are regulated from one state to another. Some states will have lengthy short sale addendums, while others will have addendums just a single page in length. This is a direct tie in to the foreclosure laws in each state, and is used for the protection of all parties to the transaction.
Considerations
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Prior to putting in an offer to purchase a short sale, it is best to do extensive research on the short sale process. There are just as many success stories as there are stories of difficulty with short sales, so it is important for you to understand all aspects of the process, since this is not a typical real estate transaction.
Expert Insight
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Short sales can be a great value in the marketplace today. However, it is important to select a real estate agent with experience in both selling and buying short sale properties with clients. Having an experienced professional by your side will make the transaction much smoother.
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