Can a neighbor or friend purchase my home in a short sale?

Asked by Underwater, 07463 Sat Jan 16, 2010

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18
Sean M Farley, Agent, Ramsey, NJ
Tue Oct 19, 2010
Hi Underwater- reading thru the answers you have received the past several months, there is some conflicting information. Truth is that each bank operates by a unique play book on short sales. I currently am steps away from closing the listing side of a short sale in Bergen County and the Lender did make reference to "Arms Length Transaction" in their documentation. They defined it as follows:
"The purchase and sale transaction reflected in the agreement is an Arms Length Transaction, meaning the transaction has been negotiated by unrelated parties, each of whom is acting on his or her own self-interest, and that the sale price is based on fair market value of the property. With respect to those persons signing this affidavit as an agent for the Seller (s), Buyer (s), or both, those agents are acting in the best interest of their respective principle (s)."
Now the true question is how the individual lender defines "Unrelated Parties." How I have seen this interpreted is that the sellers and buyers can not be of blood relation, or familial relation. Friends and neighbors, as long as they are not blood related or related thru marriage or other familial relations, do constitute an example of Unrelated.
This would be best asked when first entering a Short Sale transaction directly with your lender thru your Realtor or Attorney.

Sean Farley
1 vote
Kevin Olson,…, Agent, Colorado Springs, CO
Tue Oct 19, 2010
It has to be an "arms length transaction", meaning friends, family, and people you know cannot purchase the home in a short sale. They will investigate things, or even decline the short sale altogether, if they feel this is not an "arms length transaction".
1 vote
Please don't post incorrect information. Friends/neighbors can buy a short sale properties from the owners!
Flag Mon Sep 9, 2013
Jeanne Feeni…, Agent, Basking Ridge, NJ
Sun Jan 17, 2010
Hi there, absolutely yes, a friend or neighbor can purchase your home as a short sale. But as the prior poster stresses, the answer to the underlying question, ie will the bank work with you as a short sale if the place to begin. So begin there - talk with your bank, find an agent that is a certified Short Sale and Foreclosure Resource. If you need help finding one, I can help. I am certified and have access to a registry of resources.

Good luck to you!
Jeanne Feenick
Unwavering Commitment to Service
Search the MLS at http://www.feenick.com
Web Reference:  http://www.feenick.com
1 vote
Ines De La C…, Agent, Marlton, NJ
Sun Jan 17, 2010
Hello Underwater,
Yes, your friend or anyone pre-approved for a mortgage can buy the house. Now just because you want to do a short sale and your friend/neighbor wants to buy it means that the bank will approve it. You will have to prove the bank that you do not have funds to put your mortgage as agreed because of being laid off, sickness or other in a hardship letter.
There are several documents to be presented to the bank. Best thing is to call them and ask them directly to send you a short sale package. Remember if someone else buys legitimate the house. It will be THEIR HOUSE, not yours anymore. You can rent it though with a proper lease agreement.
A Realtor in your area can help you through the whole process.
Good luck,

Ines De La Cruz
RE/MAX Connection, Realtors
Web Reference:  http://www.inesdelacruz.com
1 vote
John Sacktig, Agent, New Jersey, NJ
Sat Jan 16, 2010
Hi Underwater -

Yes, your friend can buy your home in a shortsale, you need to get yourself a Realtor that understands the short sale process. Look for a Realtor that is SFR Certified (Short Sale and Foreclosre Resource) that has alos listed and sodla few short sales. The process can be very hard if your Realtor is not educatred in the process.

Getting an offer accepted is not as hard as it seems if you are prepared for the process. Due diligence is the key in and any transaction, but especially in short sale situation.

Let me know If I can be of any assistance.

John Sacktig
Broker / Manager
SFR Cerfied
Orange Key Realty
Office: 732-863-6969
Cell: 732-213-1409

JSacktig@orangekeyrealty.com

http://www.trulia.com/blog/john_sacktig/
1 vote
Steve Quinta…, Agent, Albuquerque, NM
Fri Sep 12, 2014
The general answer is yes, your neighbor or friend can purchase your home in a short sale. Most short sale documentation has an arms-length transaction affidavit. Your proposed scenario will be compared to the affidavit.
0 votes
mvprosec, Home Owner, Tamarac, FL
Wed Mar 12, 2014
i purchased a home from girl that my son went to do pest control for. The purchse price was not far from her pay off but the association was pushing possession. pst dues were pid by me t closing. now I learned my son is dating this girl. we closed 4 months ago. I signed a arms length trancation can this present a proublum for me I have my life sving in this house
0 votes
Ines De La C…, Agent, Marlton, NJ
Wed Oct 20, 2010
Hello Underwater,
Thanks for your question.
The short sale properties have to be bought in a "arm's length transaction". This means no family member or relative can purchase the home from you.

A neighbor or unrelated people can as far as I know.

Hope this helps.
Good luck in the sale of your home.
Best Regards,
Ines De La Cruz
RE/MAX Connection
inesdelacruz@remax.net
Web Reference:  http://www.inesdelacruz.com
0 votes
Ines De La C…, Agent, Marlton, NJ
Wed Oct 20, 2010
Hello Underwater,
Thanks for your question.
The short sale properties have to be bought in a "arm's length transaction". This means no family member or relative can purchase the home from you.

A neighbor or unrelated people can as far as I know.

Hope this helps.
Good luck in the sale of your home.
Best Regards,
Ines De La Cruz
RE/MAX Connection
inesdelacruz@remax.net
Web Reference:  http://www.inesdelacruz.com
0 votes
Thomas Tolbe…, Agent, Savannah, GA
Tue Oct 19, 2010
It must be an "Arms Length Transaction" unless you can manage to get that condition waived.
0 votes
John Sacktig, Agent, New Jersey, NJ
Tue Oct 19, 2010
Hi Underwater, since some realtors have revived this question that was asked back in January...

What was the result? Did you sell the home to the friend? Did your short sale take place?
0 votes
Cameron Novak, Agent, Corona, CA
Tue Oct 19, 2010
Definitely a No No. You're attempting to game the system is seems.
0 votes
Sean M Farley, Agent, Ramsey, NJ
Wed Mar 31, 2010
Hi Homeowner- Before any thoughts are shared, I am sorry for the struggles you've had to walk thru to bring you to this point. The positive is that help is out there! My hope for you is that you have an agent, and lawyer who understand the many ups and downs in how to make a short sale successful. As there are many, seek service providers who do not take pulse off your lender and their marketing and positioning efforts for a second. In your home sale process, and any home sale; the more buyers you expose the opportunity to, the better you position yourself to sell. The one challenge with selling to family, neighbors and friends is that selling a home is a business transaction and emotion does mix in and mess deals up on occasion. With those we know personally, the emotion can escalate to risk not only the deal but your relationship with that person. It might be a good relationship strategy to make a personal agreement that what you are entering into is a business deal and that if it doesn't make it to completion, and has bumps along the way; that it was business and not personal as they say. As far as the banks go, just keep it legit and clean; banks scrutinize short sales tremendously and side deals kill deals.....so keep it clean.
Sean Farley, Terrie O'Connor Realtors
0 votes
Diane Glander, Agent, Spring Lake, NJ
Sun Jan 17, 2010
Sure. Have them get a Realtor to assist inthe process. One that has experience in short sales. And, in the process, get yourself educated. You need to be approved for a short sale to have one. Start the process asap. If you have a first and a second loan it is more difficult and time consuming.
Expect the process to take awhile. It varies by lender. Don't accept offers from anyone looking for a quick close. You'll waste your valuable marketing time taking it off the market while waiting for bank acceptance. Better yet, get yourself a good short sale attorney and keep the house on the market while waitingfor bank approval on your offer.
I've done a few short sales. None were easy. I've had offers accepted with a counter from the bank and others lost because the bank took too much time.
Good luck!
Web Reference:  http://www.dianeglander.com
0 votes
Hugo W Meza, Agent, Clifton, NJ
Sat Jan 16, 2010
Yes...The bank requires "ARM LEnGHT Transaction" which means, No family can bail you out. As mentioned below, The hardest part is to get it approved by the bank. Some banks are easier to work with and some are pain in the neck. The respond from the bank varies as well.
If you would like more information, e mail me to mezahugo@yahoo.com
0 votes
Kathy Weber, Agent, Murrieta, CA
Sat Jan 16, 2010
Underwater,

The answer is "Yes".

After you hire an area Realtor specializing in Short Sales, I would lay everything out on the table.

If there are any concerns, DISCLOSE, DISCLOSE, & DISCLOSE!!

Just make sure, like stated below, they are ACTUALLY purchasing the property for their primary residence & will have nothing to do with you.

The lender's are really catching on to this type of sale. They may not come after you or the new buyer in the next months ahead, but they will find out. Many lender's are actually starting departments that will review many files at least up to two years after the sale of a home. They're getting smarter. They know people will only worry about it for awhile and then relax. A lender friend of mine said that they will start checking many of these files after 2 years of the date of sale.

If there are any legal questions of what you're planning, a Real Estate attorney would be worth a consultation fee, if any.

Best of luck!
Web Reference:  http://kathyweberhomes.com
0 votes
Marla McWill…, Agent, Coeur d Alene, ID
Sat Jan 16, 2010
The concerns with friends or relatives come up with the banks when they feel it is not an "arms length transaction" and they are concerned that the Seller is working with a friend or relative to transfer ownership to them, and later re-transfer back to the original Seller.... There has been some real estate fraud in the short sale arena.

As long as your friend/neighbor has intentions of living in the home, and not flipping it or selling it back to you, there shouldn't be a problem....

And, also, as mentioned below, the bank will have to accept the offer.....which is not a "short" procedure, but a "long" one! LOL...

As always, if you don't already have one, find a sharp Realtor to help guide you!

Good Luck!!
0 votes
Marc Paolella, Agent, Succasunna, NJ
Sat Jan 16, 2010
Hi Under,

If your bank accepts their offer, then certainly your friend can buy the house. But you have to get them to accept the offer. That's the hard part.

-Marc

Marc Paolella
Relocation Director
Member: Worldwide ERC
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Phone (direct): (973) 584-4235
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0 votes
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