Home Buying in 95035>Question Details

dct999, Home Buyer in Milpitas, CA

Can we back out a short sale contract ?

Asked by dct999, Milpitas, CA Wed Sep 12, 2012

We are interesting in buying short sale property, but we have heard about the long waiting period for the answer from the lender(s).
After we are in contract, could we back out the contract if we do not hear from the lender for a very long time ?

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Answers

13
Hi Dct and thanks for your post.

As the others have already answered your question about terminating a short sale contract, let's focus a little on the actual process of approving a short sale. And here, I have some additional good news.

First, aside from just a small handful of lenders, the waiting time has improved greatly from 2009-2010 when offers sat at the negotiator's desk for 3 months minimum. Now, Bank of America and Wells Fargo (both of which use computer programs to submit short sale information) can both process offers in about 15-20 days, sometimes even faster. So you don't need to anticipate a lengthy waiting time for short sale approval from many of the larger banks.

What really matters, of course, is the NUMBER of loans that need to be negotiated. If there are two or more loans on the home, the chances of a quick short sale decrease drastically. Even if both loans are with the same bank, the second loan can cause a 1-2 week additional delay. In the case of loans on the same home with two different banks, the process can become even more problematic. Only your Realtor will know for sure what types of time lines or process will be involved in buying a home sold as a short sale.

So contact your Realtor and have him/her talk extensively with the listing agent about what types of time lines will be expected in approving the sale for the home and if there would be any anticipated delays for second or third loans that need to be negotiated in the sale. Good luck!
1 vote Thank Flag Link Thu Sep 13, 2012
I am in a short sale contract too but I have been waiting and found a different property I want to make an offer on because this one is too long and also I have not gave my earnest money yet. Am I able to get out of it?
0 votes Thank Flag Link Thu May 23, 2013
Read your contract very carefully. In Florida we have a timeframe in the contract that allows the buyer to cancel if the lender has not approved the short sale within a specified number of days.
0 votes Thank Flag Link Thu Sep 13, 2012
if the lender has not yet approved the contract, then yes, you can indeed back out.

If the lender HAS accepted the contract and you are in escrow - you can cancel within the contingency period and get your deposit back.
0 votes Thank Flag Link Thu Sep 13, 2012
Obviously we don't really deal with attorneys in California though you always have a right to legal council.
If your agent did things properly you submitted a short sale addendum with your CAR RPA. In that there should have been a deadline date to approval.
I also hope you never put in a deposit on this home.
My suggestion would to be start looking for a new home and not back out of the short sale until after you found one do to lack of inventory in most CA cities.
0 votes Thank Flag Link Thu Sep 13, 2012
dct,

If the opportunity presents itself, consider having your agent protect your interests by including a "kick out" clause addendum in your purchase offer...one that is based on the time taken by the lender and one that penalizes you in no way.

Good luck,

Bill
0 votes Thank Flag Link Thu Sep 13, 2012
Talk to your agent. Truth is, in the current market with such little inventory, you might be better to stay put than to get out and start looking again. You have a much better chance of getting a home for a lower price if you wait for a short sale to be completed than if you get back out into the market and get into multiple offer bidding wars on everything out there.
0 votes Thank Flag Link Thu Sep 13, 2012
Good answers so far. The short sale addendum is the way to state how long you are giving the lender to respond. The other think to keep in mind is that once you get lender approval for the short sale you still have the 17 days to do all your inspections and decide rather or not to move forward.
Good luck,
0 votes Thank Flag Link Thu Sep 13, 2012
During the 17 days period, do you need a reason or can you cancel the contract just because you decided it was bad timing and had a personal issue to tend to that was more important.
Flag Fri Jul 25, 2014
There is no substitute to reading the Agreement details. If you think an attorney is required you might one that will give you a 30 minute free consult to determine if they can help you or not. http://www.naplesrealestateguys.com/
0 votes Thank Flag Link Thu Sep 13, 2012
It depends upon how your offer is written, specifically, the Short Sale Addendum that is attached to your offer. You can specify a date of how long you are willing to wait for the bank(s) to approve the short. Ask your agent to give you a sample copy so that you can read in advance of signing.
0 votes Thank Flag Link Thu Sep 13, 2012
It depends on your contract. In addition to your other contingencies you have a time for the bank to respond. if they don't respond within that time then you have your contingency out.

In order to get your offer accepted you should plan on a reasonable time to stay in contract otherwise, the seller may not want to accept your offer.

Your agent will explain all the details to you at the time of signing the contract or ideally sooner.

Have an amazing day!
Web Reference: http://www.terrivellios.com
0 votes Thank Flag Link Thu Sep 13, 2012
The simple answer is yes, you can get out of the contract. In addition to the standard 45-day lender approval contingency, there are other ways to get out of the contract. The balance here is how much skin you have in the game vs. how easy it is to get out of the contract.
Web Reference: http://talisrealestate.com
0 votes Thank Flag Link Thu Sep 13, 2012
When presenting the offer you will be including a short sale addendum which includes how long, minimum, you will be in contract for. This number is up to you, the buyer, but standard is more than 45 days for a lender to know that you are actually in the game.

If you put in an offer with a X day minimum then yes you will be in contract for that minimum stated time.

I hope this answers your question, if not do give me a call at (408) 840-3852 or Thomas.Feng@gmail.com

For detailed market reports, new listing photos, and interest rate reports check out my blog http://BayAreaConnect.com
Web Reference: http://BayAreaConnect.com
0 votes Thank Flag Link Wed Sep 12, 2012
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