Here’s the original question:
On the short sale addendum to purchase and sale contract is there a benefit to increasing the number of days for the seller to deliver written notice to buyer of approved purchase price in contract terms (from 30 to 90)
Let me explain a bit about the short sale contract, and the addendum that is included in the Arizona Purchase Contract. For all intents and purposes, if you write a purchase contract in Arizona for a Short Sale, you will include the Short Sale Addendum to the Purchase Contract to protect your Seller so they are able to perform when the time comes.
This very addendum makes the entire contract very weak, even though it is considered a contract. On the addendum there is a Short Sale Contingency. If the seller fails to come to an agreement with their creditor, they can cancel the contract. If the Buyer decides they don’t want to wait around, they can simply cancel unilaterally (line 40 of the Short Sale Addendum.)
Knowing these two provisions are there lends to the need for additional terms so people aren’t wasting their time. I’ll save that for another article. This article is in response to the original question which asks a question that has no answer, but has something to do with another section of the [download id=”14″] which reads:
35. Close of Escrow: Close of Escrow shall occur thirty (30) days or __________ days after delivery of Agreement Notice.
The original question suggests that there is a time frame in which the seller is required to deliver the Agreement Notice. This is simply not the case. Our Short Sale Addendum simply states on lines 11-12 that:
Buyer and Seller acknowledge that it may take take weeks or months to obtain creditor(s) approval of a short sale.
There is no time specified. There are time limits defined on the Short Sale Addendum, but not pertaining to how long it will take to reach an agreement. That is why the contract is so open-ended, allowing for either party to cancel unless otherwise agreed upon.
Line 35 can certainly be a nuisance, however, as some lenders will use this number to calculate the date of expiration of the short sale approval. 30 days is a relative standard amongst buyer’s lenders. If you shorten this time frame, you create a margin for error, which is good if the creditor gives 30+ days on the approval letter. It can backfire, however, if they match this number on their approval. Many times creditors will look at line 35 and compare it to the type of financing. If it’s a cash purchase, they may write an approval that expires before the contract’s defined close of escrow. If this happens, it’s important that the second box of the agreement notice be checked and an addendum is created that both the buyer and seller agree upon.
Again, the original question addresses terms and conditions that aren’t part of our Arizona Purchase Contract, so I hope that some of these explanations clarify how time-lines work in the short sale addendum for our state. For details on your state’s contracts, please consult your local real estate board.