Home Buying in Weehawken>Question Details

Happyhome2011, Home Buyer in Weehawken, NJ

For Short Sale in NJ, after buyer paid $1000 deposit, Does buyer pay 10% deposit after attorney review or after Bank/Lender approval? Thanks!

Asked by Happyhome2011, Weehawken, NJ Tue Feb 15, 2011

For Short Sale in NJ, after buyer paid $1000 deposit, Does buyer pay 10% deposit after attorney review or after Bank/Lender approval? Thanks!

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11
Hi Happy,

So want did you do? What happened and where are you within the Short Sale process?

The $1,000 good faith deposit was going to happen, it shows you have interest in the property and gives the homeowner some form of verification that you are a true buyer. Since there is actually no accepted offer there is no reason for you to tie up any further money and I hope you did not.

Did you speak to the Realtor or Attorney involved and make sure that you are not going to be charged for any service if the bank does not accept your offer?

Please give us an update!
2 votes Thank Flag Link Thu Feb 24, 2011
Let me point out the NJAR Addendum Regarding Possible Short Sale (which should accompany each contract to purchase a short sale in NJ) states in section 3...(and I quote)

"3. Seller's Obligation to Seek Approval. After the completion of Attorney Review, Seller shall seek written approval from the Designated Lien Holders of the Agreement, and their consent to accept less than the amount owned to them in order to release their liens..."

That means attorney review takes places immediately after the buyer and seller sign the contract, and before the contract is sent to the bank!

Laura Giannotta
Keller Williams Realty-Atlantic Shore
2 votes Thank Flag Link Mon Feb 21, 2011
There is actually no need for attorney review until the bank responds to the presented offer.
What is there for an attorney to review when there is no accepted offer?

Sounds to me like your buyer agent is not experienced with short sales. It is good that you are asking questions, but your due diligence would have served better before the offer.

Logically, what do you have? Why give a deposit? The Bank has not even looked at your paperwork or responded? I do not blame you for not wanting to give the 10%.. why should you? You do not have an accepted offer. Will there be an attorney fee after all the "work" he/she does and your offer is NOT accepted? Who pays that?

You should have questions.
2 votes Thank Flag Link Tue Feb 15, 2011
Hi Happy -

It would be part of the initial offer within the contract. You state the terms that you presented. For me and how I present a short sale, the deposit would be due upon bank approval, which would then start the attorney review process.

There is actually no need for attorney review until the bank responds to the presented offer.
What is there for an attorney to review when there is no accepted offer?
2 votes Thank Flag Link Tue Feb 15, 2011
Do you already have a contract or is this a question in preparation of putting a contract together?

You may want to write the contract offer to include that the balance of the 10% deposit be payable upon lender acceptance therefore making the deposit contingent on another contingency, the banks short sale approval. Keep in mind the SELLER may require a deposit in order to accept the contract and sign it in the first place, most listing agents would require some sort of deposit and the buyer to sign a short sale addendum as well in order to ensure the buyer commits to hanging in there for a while to wait for an answer from the bank before getting frustrated and just walking away with no skin in the game.

New Jersey contract law states that a fully executed contract becomes binding after 3 days unless you go into attorney review and I know of no exception to that law that says "unless it's a short sale", if someone knows otherwise maybe they can share.

I can understand how many agents want to save their clients money trying to put off beginning attorney review until after the bank approval contingency has been obtained however that is just a contingency, we don't put off attorney review for mortgage contingencies or inspection contingencies, etc. so why would short sales be any different? This may be done with good intentions however we all know what the road to hell is paved with. It would be a shame to get the bank approval just to have the sellers attorney say no changes, the contract is now binding, and they can.
1 vote Thank Flag Link Tue Feb 15, 2011
Happy,

Laura has the right of it.

Many times it depends on what the Bank wants. It can depend on if the Short Sale is pre approved by the bank or weather or not it is a HAFA short sale as well. Have your attorney ask at ammend the contract to have the second deposit 7-10 days after ALL lenders have approved the sale.

Also ask your realtor if they have done many short sales or are an SFR. If they are not, its not a big deal just ask them to seek assistance with in their office from some one more knowledgeable.
1 vote Thank Flag Link Tue Feb 15, 2011
Hi I'm buying a short sale home and I paid tha $1000 down and 10% of the house and it went to attorney review but I still didn't get bank approved. I do have a signed contract from the home owners. So where is my process now and the bank did sent out an apprisal. I did home inspection to, so I close to get bank approved. Please any answers thank you.
Flag Tue Apr 30, 2013
I ask my buyers to write into their contract that they'll pay an additional deposit within 7 days of bank acceptance of the offer. Oftentimes this allows the buyer to schedule a home inspection before making the 2nd deposit.

Laura Giannotta
1 vote Thank Flag Link Tue Feb 15, 2011
If it's a short sale it depends on what the buyer's contract states, or the bank requires after accepting the offer.

Laura Giannotta
Keller Williams Realty Atlantic Shore
1 vote Thank Flag Link Tue Feb 15, 2011
Hi Happyhome2011, I see you've gotten good advice here but just want to add a few things..

Have a conversation with your attorney addressing your concerns, it doesn't always matter what is 'common' but what works for both parties. You may be able to negotiate a deposit less than 10% and have the remaining due after acceptance or at closing which many people do. I understand that you won't be gaining interest but unfortunately, you will need to leave some money in escrow.

Without it, the attorney's will feel that you are not serious and therefore they may not want to risk taking the property off the market if you are not 'committed.'

Remember to have your attorney include a date that you will agree to wait for a response so that it doesn't drag on forever keeping you and your money tied up.
Typically, my buyers wait 60 - 90 days for a response from the bank and if they do not receive it in that time, then they are free to walk without penalty.

Some banks work quicker than others. Personally I would say 60 days is best, and should the 60 day period come up and you decide to stick with it, then you can tack on more time; but that is up to you.

Best of luck!
0 votes Thank Flag Link Wed Feb 16, 2011
Actually my buyer agent recommended me to hire attorney after seller signs the contract, I did. Now they said that it is common to pay 10% deposit after attroney review for short sale which I do not want to, puting 10% deposit without knowing whether Bank approves. That's a lot of money sitting there with no interest but just give me worries over the next few months. Attorney said that he will talk with seller attorney.

I am asking question here to seek for more opions from real estate professionals in NJ.
0 votes Thank Flag Link Tue Feb 15, 2011
What I would like to know is that how lawyer/buyer agent would recommend from protecting buyer's interest, thanks!
0 votes Thank Flag Link Tue Feb 15, 2011
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