Can a Friend or Family Member Buy my Short Sale?
Today's question is can a friend or relative buy my house if it's listed as a short sale?
So if you find yourself in the unenviable position where your house is upside down and you can't sell it as an equity deal, can you offload the house onto a family member? Can that family member or friend or relative take that property off of your hands without ruffling the feathers of the bank?
The answer is almost certainly no.
The lender's gonna require that you fulfill and satisfy a number of conditions and terms before they agree to let you sell your property short.
One of those conditions is an arm's length transaction.
The lender will require you to sign an arm's length affidavit, attesting to the fact that you are not selling your property to a friend or relative or business partner. Moreover, that arm's length affidavit is gonna prohibit you from engaging in any sort of back room dealings with the prospective buyer.
That means there are no behind the scenes or covert buyback agreements or rental agreements between the parties. And that's because the lender wants to make absolutely certain that they're justified in their decision to award a short sale and let you off the hook for that remaining balance.
The last thing the lender wants is to forgive all of that debt following a short sale only for the borrower to get the house back without having to pay any of that remaining balance.
And this is why the arm's length affidavit contains so many strict prohibitions expressly prohibiting the transfer of property from the distressed homeowner to a friend or family member out of fear that the distressed homeowner will, once again, end up with that property.