Home Buying in 92653>Question Details

james4proper…, Both Buyer and Seller in Orange County, CA

If I purchase a short sale, can I then turn around and sell it to a family member of the previous owner?

Asked by james4properties, Orange County, CA Fri Jan 11, 2013

Help the community by answering this question:


The lien holder, as you are buying the short sale will have you sign an "Arm's Length Affidavit" form which, by signing it you're stating that you are NOT a family member, friend or business associate with the legal owner (i.e. seller) & that you do not have any "side agreements" with the seller (like, giving them money on the side or selling the property back to them after closing)

Some short sale lien holders will also have you sign something that states that you can't resell the home for 30 or 60 days after closing.

But, it is my opinion (I am not an attorney & you should consult one), that if you are not a family member or friend or business associate of the current owner & you turn around & sell it to a family member of the previous owner, that is not illegal or an act which the previous lien holder could come after you later.

Trust me, these banks are busy enough processing short sales, making new loans & screwing around with homeowners who think the bank cares enough to give them a viable loan mod that makes sense in the long term, then to pursue you in a lawsuit for selling a property back to a family member of a previous short selling homeowner. (Again, this is my opinion, I'm not an attorney, you should consult one)

Shoot me an email directly if you'd like to talk about this further, I don't look back on this same Trulia thread for answers posted after mine.

Emily S. Knell
562-430-3053 c
Realtor Since 1996
Realty ONE Group
Short Sale Specialist - 100% success rate
1 vote Thank Flag Link Mon Jan 14, 2013
No you can not. The rules on Short Sales are very clear. The transaction has to be an arms length transaction.

The home can not be sold back to previous owner or a family member of the previous owner.

I am sure some people have come up with "CREATIVE" ways to try and get around the rules, BUT I would not advise it.

Kawain Payne, Realtor
0 votes Thank Flag Link Fri Jan 31, 2014
Good conversation today, I look forward to our meeting Wednesday...

Andy Gillespie
Keller Williams Realty
0 votes Thank Flag Link Sat Jan 11, 2014
Tread carefully, buying from a seller as a short sale and then knowingly selling to a relative of the seller's may be considered less than an Arm's Length Transaction. I think lenders are / will be scrutinizing these activities more closely;

0 votes Thank Flag Link Wed Oct 16, 2013
This would be considered a bail out and is frowned upon by most lenders.
0 votes Thank Flag Link Mon Oct 14, 2013
No not a good idea. If you are trying to flip it, just follow the lender guidelines, usually 30-60 days to flip to a non-related buyer. Here is the link to Short Sale Info http://www.theresa4homes.com/Content.aspx?pid=76234
0 votes Thank Flag Link Fri Apr 26, 2013
Generally I would say no but short sales do not all work the same. Each lender can work by their own set of guidelines. A real estate attorney is a good idea with this type of scenario.
0 votes Thank Flag Link Wed Jan 30, 2013
Most lenders now require the sellers of a short sale as well as the buyers of the short sale to sign an arms length transaction affidavit that prevents you from doing this.
0 votes Thank Flag Link Thu Jan 17, 2013
I would say no. I came across a similar situation last year, a RE lawyer said there are too many chances of punitive action from the lien holder.
0 votes Thank Flag Link Thu Jan 17, 2013
I would speak with an attorney about the specfics. You could always ask the lender directly.
0 votes Thank Flag Link Thu Jan 17, 2013
Hi James,
The question is for how long "you the buyer" will hold the property before selling it?

NMLS 380933

0 votes Thank Flag Link Sat Jan 12, 2013
Ah, good question. No more than a month or two.
Flag Sun Jan 13, 2013
Both Keith and Maria gave good information. As Keith pointed out different lenders have differing restrictions, I would definitely speak to a local real estate attorney to see if this is viable. You may possibly be opening up a can of worms as family members typically are not eligible to buy a short sale.
0 votes Thank Flag Link Sat Jan 12, 2013
Please consult a lawyer as there are some stipulations or conditions on the contract that the short sale should be within an arm's length transaction.

Although you are not related to the seller, by you selling it to the party who is related might be construed as shady.

This is just my opinion and not a legal advice.

0 votes Thank Flag Link Sat Jan 12, 2013
Not all Short Sales are the same, each transaction may have a different lending insitution which is being shorted. The short sale approval or short sale application will state the restrictions of that individual lending institution or debt servicer. If you knowingly or purposely disregard their terms of approval that is a form of loan fraud. Read their approval terms before doing any family planning.
0 votes Thank Flag Link Fri Jan 11, 2013
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