I put an offer on a short sale and went to contract. The seller's do not want any contingencies such as inspection, appraisal, etc. Is this?

Asked by Heather, Suffern, NY Tue Oct 12, 2010

normal? When we went to the contract signing, we noticed there was a third party now involved who signed the contract. All along we thought we were dealing with the owners of the home who were negotiating with the lender for a short sale. What are the implications of a third party being involved? Do they have the title/deed for the home?

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8
Susan Hoffla…, Agent, Shoreview, MN
Thu Jan 13, 2011
Yikes, Heather! Not a good scenario. Time to walk away so you don't have to go to court and prove you had no intention to commit fraud. How did this turn out?
Web Reference:  http://www.homestosellmn.com
0 votes
MaryAlice Be…, Agent, Eagan, MN
Wed Oct 13, 2010
Chances are, you are dealing with an investor who is engaged in "flipping" short sales. In this scenario an "investor" agrees to purchase the home from the owners and has them sign a purchase contract. This is usually a low ball offer that is subsequently presented to the sellers lender. In the interim, the house is being marketed at a higher price. When a buyer agrees to pay a higher price the offer is accepted and the home is typically sold at a simultaneous closing. The investor closes on the home at "x" price and then turns around and sells it to the end buyer at "y" price and collects the spread. This is considered mortgage fraud and it is actively investigated by regulatory authorities.

Here is an in depth explanation from the MN Realtor Association's legal counsel.

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0 votes
Kevin Olson,…, Agent, Colorado Springs, CO
Tue Oct 12, 2010
Hello Heather,

The only "third party" I've ever seen is the bank/lender (every time it was the lender). The only way a seller could sell their home without a contingency on an appraisal would be to a cash buyer. Every type of financing I am aware of requires an appraisal to be done. I would recommend gettin an appraisal even if you are a cash buyer, just to protect yourself. I have never heard of someone outside of the lender or homeowner holding title.

Ask your agent to get on this right away to get clarification. Situations where you are not informed cannot lead to any good in the future.

Kevin
0 votes
Clark Riel, Agent, Reno, NV
Tue Oct 12, 2010
This is just my opinion but walk away from this deal, there is something wrong here.
0 votes
Marge Bennett, Agent, Fort Myers, FL
Tue Oct 12, 2010
I think you need to ask a bunch of questions through your agent to find out what is going on. I can't see me recomending that my buyer waive those contingencies. Don't you use attorneys to closes contracts in NY? Might want to get their input too.
0 votes
Cameron Piper, Agent, Forest Lake, MN
Tue Oct 12, 2010
Heather,

The questions regarding the deed would only be able to be answered by the listing agent. Find out who the third party is and why they are involved. It is unlikely that the owner's have sold the home to the third party since that would require bank approval.

It is not uncommon for listing agents to want buyer's to remove all possible contingencies prior to sending the offer to the bank. There is a lot of work involved with a short sale and a good many of them fall apart because the buyer walks away based on an existing contingency. The question you need to wrestle with is whether or not the house is a good enough deal to risk the money (inspection/appraisal costs) up front. The good news is that with no contingencies, your offer will be given a higher priority at the bank since it unlikely to fall apart for no good reason.

Cameron Piper
Web Reference:  http://www.campiper.com
0 votes
Don Tepper, Agent, Burke, VA
Tue Oct 12, 2010
In what way is the third party involved? The "traditional" third party in a short sale is the lender. But it doesn't sound as if you're referring to the lender.

No, it's not normal for those contingencies to be there. In a short sale, you're purchasing the property from the owner (in most cases; see below), with the transaction being contingent upon bank approval. It wouldn't matter to the owner what conditions are attached. He/she just wants to accept an offer that the bank will approve.

It sounds as is there's an investor (or something similar) interposed between you and the owner. Presumably (and I'm only guessing) the investor has a power of attorney from the owner to conduct negotiations. And there's nothing inherently wrong with that.

However, to protect yourself, you do need those contingencies. You do need an inspection and you should make the contract contingent upon appraisal. (Note: If your Realtor advises otherwise, I defer to your Realtor's judgment, but be sure to ask: "Why do you advise that?")

Hope that helps.
0 votes
Aaron Dickin…, Agent, Champlin, MN
Tue Oct 12, 2010
You need to speak about this with your agent and/or attorney. It will take someone who knows all of the details of the situation to properly counsel you - this forum will not be able to provide that.
Web Reference:  http://www.mnseller.com
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