Home Buying in 92345>Question Details

Bobbie Butler…, Real Estate Pro in Redondo Beach, CA

can a family member buy your short sale property?

Asked by Bobbie Butler, CDPE,GRI, QSC, Redondo Beach, CA Wed Feb 23, 2011

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Most all lenders require the transaction to be arms length. This means that the house must be sold on the open market. There are exceptions that occur, but they are extremely rare. Exceptions usually have compensating factors, such as an over-market sales price.
1 vote Thank Flag Link Fri Jun 15, 2012
Can I buy my dads property that was short saled a year ago and is now back on the market.
0 votes Thank Flag Link Sun Jun 17, 2012
No, most banks will not allow that to occur. They want it to be an "arms length" transaction. Feel free to refer any clients you may have my way. I would appreciate the business and vice versa back to you.
0 votes Thank Flag Link Sun Apr 22, 2012
In one word, no.

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0 votes Thank Flag Link Thu Feb 24, 2011
While short sales are supposed to be "arm's length" I have seen one sold to a family member. It was fully disclosed to the lender from the beginning and they were OK with it. So in the end with full disclosure, it is up to the lender.
0 votes Thank Flag Link Wed Feb 23, 2011
Hi Bobbie:

Typically, a Short Sale Lender requires an "arms-length" transaction. Including the Seller, the property may not be sold to anyone the seller has a close personal or business relationship with including family, friends, or in some cases, even neighbors. The Seller is normally required to sign a paper confirming a transaction’s “arms-length” status.

I'm not saying it can't happen, the current market still has my jaw dropping on occasion; however, expect the probability of an exception to this rule to be extremely low as this would incentivize transactions that may lack "good faith" intentions.

Best, Steve
0 votes Thank Flag Link Wed Feb 23, 2011
I have closed a couple short sales that were with family members-the banks just required that it was disclosed
0 votes Thank Flag Link Wed Feb 23, 2011
No. A short sale must be an arm's length transaction. An arm's length transaction is one where the seller and the buyer do not have a close relationship. A short sale where the buyer is a family member, friend, or business associate of the seller will not be approved. Most lenders will require the buyer, seller, and their real estate agents to sign an "Arm's Length Transaction" affidavit attesting to the fact that the transaction is an arm's length deal.
0 votes Thank Flag Link Wed Feb 23, 2011
Not allowed with most banks. Most require an arms length agreement, signed by the seller and the buyer
0 votes Thank Flag Link Wed Feb 23, 2011
Nope and they (the short sale lender) will ask you for an affidavit.
0 votes Thank Flag Link Wed Feb 23, 2011
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