What Is A Short Sale Addendum? Why Does It Exist
Today's question is what is a short sale addendum?
Now, if you recall from previous videos, a short sale is contingent upon lien holder consent.
The short sale addendum sets forth those contingencies and brings clarity to those terms and conditions.
The short sale addendum document itself typically contains seven or so sections which spell out all of the terms, starting with section one.
Section one describes the time period.
Now the default period is 45 days if that section is left blank. However, as we know from previous videos, a short sale can take anywhere between two to four months to negotiate until we've reached approval from the lender.
Section two and three gives the buyer options regarding inspections and contingencies.
Now these clauses are usually triggered immediately upon offer and acceptance or upon approval by the lender.
Section four is the bank's discretionary clause.
That lets us know that, hey, the bank can withhold consent for whatever reason and that there's absolutely no guarantee that the lien holder has to consent to the short sale. So section four is more of a discretionary clause. That lets the parties know that, hey, look. The lien holder can withhold consent for whatever reason and that there's absolutely no guarantee that the bank will issue approval for the short sale.
Which leads us to section five which is sort of a costs and fees provision.
And that lets the parties know that there may be additional fees incurred as a result of negotiating the short sale transaction.
Section six, we're almost there, is an optional clause.
Most buyers' agents ask that it be struck from the contract altogether. That's because section six allows the seller to continue showing the house even after there's an offer and acceptance between the parties.
And, finally, section seven. I call this the CYA clause.
Now this section urges the parties to seek the advice and counsel of attorneys and tax experts to help discuss with them and go over the potential legal liabilities as well as the tax implications of doing a short sale.
So please, I encourage you to sort of heed the advice of the short sale addendum and seek the advice of attorneys and tax professionals who can help navigate you through these sort of treacherous waters of doing a short sale.