April 2, 2009

Have Your EYES WIDE OPEN if the deal involves a Short Sale!

Purchase offers involving short sales are known for taking 60 days or longer to get approved so we prepare our clients accordingly. Depending on your risk tolerance, there may be another reason to avoid them or at the very least, have your eyes wide open.

I recently learned that a well known national mortgage bank has been approving short sales involving their mortgages and inserting a clause allowing the bank to pursue BOTH the seller and buyer for payment of the deficient mortgage balance after the close of escrow! Wait just a minute … its one thing for the seller’s lender to pursue the seller for any shortage but to go after the buyer? Who in their right mind would agree to buy a home under these terms? Maybe they were caught off guard? This new practice was brought to my attention by a local title company who has witnessed these short sale agreements and adopted new procedures to make sure all parties to the escrow are fully informed.

As someone whose clients are buyers, my take away from all this is … make sure the mortgage company’s short sale approval is given to the buyer’s agent and reviewed with the buyer to ensure full disclosure thereby allowing them to walk away from the deal without liability. Now you know what to look out for!