Buyer Disclosure for Virginia Short Sales


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There are a number of issues that face homebuyers in today’s market. In our area a large number of listings are Short Sales. These transactions pose a potential risk management issue for Brokers and Agents. More over they can actually discourage a buyer or cause them to loose a good opportunity while messing with a Short Sale.

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Buyer Disclosure for Virginia Short Sales

  1. 1. What Buyer’s Should Know About: SHORT SALES Short Sale Buyer Agency Policy Jennifer and Matthew Rathbun, REALTORS® 5444 Jefferson Davis Highway, Suite 100 Fredericksburg, Virginia 22407 540-287-8841 Copyright© 2009 Matthew Rathbun
  2. 2. Is a Short Sale right for you? Thank you for allowing us to assist you in purchasing your next home. We have created this document to help prepare you for the process, should you decide to purchase a home being sold for less than the Seller owes on their loan(s). This is commonly known as a “Short Sale.” At the time of this writing, about fifty percent of the market in our service area is a distressed property. Reportedly, only seventy percent of those homes being sold as a Short Sale are actually closing. There are a number of reasons why the purchase will not close. Here is a partial list of why the home may not close with the initial buyers: 1. The offered sales price is too low for the Lender to release the mortgage and the Lender decides that the process of foreclosure will yield them a higher net. 2. In rare occasions the Listing Agent hired to assist the Seller is not properly trained or capable to complete the process. 3. The Seller does not qualify for a Short Sale. 4. The Lender simply does not approve Short Sales. 5. The foreclosure process is too far along for the lender to have time to process the Short Sale. A ratified contract from a Buyer, does not stop the existing Foreclosure process. 6. The amount of the Offer is too low. Lender’s being asked to approve deficiency amounts, are only going to forgive a certain percentage of debt. The price on a Short Sale is not a “deal” as one would expect to get in buying an already Foreclosed home. Most asking prices are the lowest the Mortgage company will accept. Additionally the process can take from three to six months (sometimes longer) to be approved by the lender. Only Buyers without a pressing timeframe are ideal for a Short Sale transaction. Home Buyers are cautioned to carefully consider if they wish to pursue a Short Sale. You, as our client, may elect to have us exclude Short Sales from the list of properties that we recommend to you. It’s important for you to know that in Virginia, a Seller is not required to disclose they are pursuing a Short Sale in their marketing. Typically this information is disclosed upon the Buyer Agent presenting an Offer to Purchase. We have a number of addendum's and clauses that we place in the contracts to try and protect a Buyer. ___________ / ___________ Buyer Client Initials November 15, 2009 __________________ Date Page 1 of 3 Matthew and Jennifer Rathbun •
  3. 3. Our Policies As a result of our experiences and knowledge about the current market place, we have developed a list of personal policies that we wish to inform you about. • Upon ratification of a contract, we will not continue to show additional properties to Buyers. A ratified contract is a legally binding agreement and unless a Buyer Client is willing and able to purchase more than one home or property, we will not put that client into jeopardy of legal recourse by defaulting on their contract. • We will not allow the Listing Agent to negotiate our fee for service, with the Third Party Approver. • It is our policy that we do not work with, nor negotiate with non-licensed individuals. The Listing Agent with the fiduciary duties to the Seller will be the person whom we obtain our information from and communicate with. However, we will work with your Lender and/or Attorney if you so desire. • We are ethically and legally unable to communicate with the Seller’s Lender or any other parties, other than their agent. We are at the mercy of the Listing Agent and their Broker when it comes to obtaining status and information in the transaction. Your Protections Our intent is to protect your interest to the best of our abilities, for that reason we place the following conditions in each Offer to Purchase Agreement. These conditions are always negotiable, with the Seller. • Each Offer to Purchase will be contingent on the Seller disclosing, no later than the time of ratification, if they intend to pursue a Short Sale. Additionally, if the Seller finds after ratification that they need to ask the Lender for a Short Sale, they will be required to disclose that issue to us and give you up to three days to decide if you’d like to proceed. • According to the Virginia Association of REALTORS® Legal Counsel, Sellers are able to submit several contracts to the lender, for third party approval. We place verbiage in our offers that makes ratification contingent on the Seller ONLY submitting our contract to the Lender and no others. • We will give the Seller up to 30 days to present a Lender’s Approval of the Short Sale, or give you the right to void the contract. ___________ / ___________ Buyer Client Initials __________________ Date November 15, 2009 Page 2 of 3 Matthew and Jennifer Rathbun •
  4. 4. • The Offer to Purchase will have provisions holding that all contingencies (such as finance, home inspection, applications dates, etc...) will begin only after the Seller produces an approval from all lien holders, in writing, that the Short Sale is approved to close. Occasionally the Lenders will give a Short Sale approval, that is conditional on closing in a short period of time. You need to be aware that in order to meet those deadlines, it may be necessary to waive Buyer protections, such as home inspections, etc... • Occasionally the Seller will request permission to leave the home “active” in MLS to try and solicit other buyers. This is a violation of the MLS rules, REALTOR® Code of Ethics and Virginia Law as homes may not be listed “For Sale” if they are not, and we encourage you to not agree to these terms. • We will ask that all contingencies, including deposit of the escrow not begin until after the Lender has approved the deficiency judgement. Considerations In this troublesome time for real estate, there remains opportunities for Buyers to get wonderful homes and premier properties, but the trade off is an unstable process. We, as your agents, can and will do our best to protect your interest and keep you informed, but we can offer no promises for a smooth or successful Short Sale closing. We will contact the Listing Agents and try to obtain as much information about the process from beginning to end. We will convey that information promptly. This is a very uncertain process and we encourage Buyers to seek out traditional listings or REO (Real Estate Owned, commonly referred to as Foreclosed Properties) Listings. If you wish to not pursue homes that are known to be Short Sales, please indicate this below. Optional: I/We wish for our Agent(s) to exclude those listings known to be Short Sales from the properties presented. We understand that we may decide to pursue a Short Sale, and if we do so the existing Agency Relationship is not dissolved. _______________________________ _______________________________ Signature of Buyer(s) ______________________________ Date ___________ / ___________ Buyer Client Initials November 15, 2009 Page 3 of 3 __________________ Date Matthew and Jennifer Rathbun •