Today I have a new beef with short sale lenders. Short sales are particularly time consuming for buyers/sellers/agents/etc. and we have hoops to jump through at every turn along the way. Often times we will go through 1 maybe 2 or 3 buyers before one finally makes it to the closing table! Some of the reasons we never make it to closing with the first or second buyer is because…buyer gets impatient, bank’s opinion of value and counter offer, bank guidelines and restrictions, inspection results, appraisal results, etc.
Recently we had a short sale rejected because the buyer was a “Trust”. Soon after it was rejected, I received an enewsletter from a local attorney’s office saying this is becoming commonplace in the short sale market. Banks no longer want to accept trusts or corporations as the buyer on a short sale contract because they believe they cannot fully validate if it is an “arms length” transaction. Arms length is a transaction in which the buyer and seller are acting independently and have no relationship with one another. This is important in a short sale because the bank is often times letting the seller off the hook in some way and they want to make sure they will not be taking advantage or benefiting from the sale. I suppose the banks feel they cannot determine if it is at arm’s length if there are multiple unknowns in a trust or company.
The frustrating part is that we all have to sign an arm’s length affidavit stating that it is in fact at arm’s length; but apparently that is not good enough anymore. Often times these distressed properties are in rough shape and the only way to purchase them is with a cash transaction…cash is usually an investor…an investor usually has structured themselves as a trust or corporation. If a trust or corporation cannot buy the property, it limits the number of buyers able to purchase these short sales and absorb that inventory. Keep this in mind if you are an investor and searching for some great short sale deals.
Have you experienced any other hurdles as a buyer or seller trying to short sale?