It is a common practice for the lender to require the seller to sign an “arms length” affidavit as part of the short sale approval process. This arms length affidavit is intended to prevent the owner of the house from selling to a family member. It may also prevent the owner from selling to a business associate.
Why would the lender not want the owner to sell to a family member? The reason in part is because of the possibility of the owner and the family member creating a side deal whereby the owner may receive profit or some other benefit from the sale of the home. In order for the short sale transaction to happen, the lender must agree to accept less than the owner originally borrowed. The lender does not want the owner to “have their cake and eat it too”.
It is unfortunate that the underhanded dealings of a few impact everyone. I am sure there are cases when allowing a home to be sold to a family member would be of benefit to everyone involved, including the lender. The fear the lender has of mortgage fraud makes the likelihood of this happening nearly impossible in today’s market.
Jul 11, 2010
New theme park coming to Central Florida will bring tourists & jobs.
Managing Director of LEGOLAND Parks John Jakobsen says on this WOFL FOX 35 video that the opening of the LEGOLAND® Florida theme park will bring tourists and approximately 1,000 jobs to the Central Florida area. To find out more about the new park, visit http://www.legolandfloridaresort.com.
Jul 8, 2010
Leverage Our Experience To Your Advantage - Watson Realty Corp.
Founder and Chairman of the Board, William Watson, Jr. of Watson Realty Corp. discussing the advantages of using our full service real estate firm.
If the owner does not sign the contract how will you enforce it?
We are encountering houses for sale in our area where the listing agent informs us that the owner of the house has entered into an agreement to sell their home to a third party and it is this third party that has now listed the home and will be negotiating the transaction with our buyer. As you might have already guessed, these listings have short sale contingencies.
Here is how the conversation goes once the listing agent makes their disclosure to us.
Me: So the actual owner will not be signing the contract to purchase?
Them: No. The person(s) that have the option to buy the home will be signing the contract.
Me: How can the person who only has an option legally sign the contract?
Them: We do this all the time. The owner of record has agreed to sell the house to the person with the option and the person with the option will sell the house to your buyer. It will all be closed at the same time.
Me: Is this legal?
Them: Call our title company. The title representative will tell you “we do this all the time” and everything is legal.
Me: Does the owner’s lender know what is happening?
Them: The bank does not care; as long as they get the short sale price they agreed too, they are happy.
Me: So then we have it in writing that the owner’s bank knows what is happening?
Them: Call the title company; we do this all the time.
Me: If it is legit, why can’t we get the owner of record’s signature?
Them: That is not how we do these types of transaction.
I am not an attorney so I will leave it to those that are to determine the legality of transactions like this. In my opinion it just seems wrong not having the actual owner sign. Also, if it is legit, why doesn’t the owner’s bank know? We strongly suggest any buyer that may decide to enter into a contract to purchase a home with someone other than the person on the deed seek the counsel of an attorney. Since the owner of record is not signing the contract to sale, one of the questions I have is how would the buyer enforce it and against who?
Whenever I hear the phrase “we do it all the time” as the main answer to my questions and concerns, I get nervous. So should you.
Here is how the conversation goes once the listing agent makes their disclosure to us.
Me: So the actual owner will not be signing the contract to purchase?
Them: No. The person(s) that have the option to buy the home will be signing the contract.
Me: How can the person who only has an option legally sign the contract?
Them: We do this all the time. The owner of record has agreed to sell the house to the person with the option and the person with the option will sell the house to your buyer. It will all be closed at the same time.
Me: Is this legal?
Them: Call our title company. The title representative will tell you “we do this all the time” and everything is legal.
Me: Does the owner’s lender know what is happening?
Them: The bank does not care; as long as they get the short sale price they agreed too, they are happy.
Me: So then we have it in writing that the owner’s bank knows what is happening?
Them: Call the title company; we do this all the time.
Me: If it is legit, why can’t we get the owner of record’s signature?
Them: That is not how we do these types of transaction.
I am not an attorney so I will leave it to those that are to determine the legality of transactions like this. In my opinion it just seems wrong not having the actual owner sign. Also, if it is legit, why doesn’t the owner’s bank know? We strongly suggest any buyer that may decide to enter into a contract to purchase a home with someone other than the person on the deed seek the counsel of an attorney. Since the owner of record is not signing the contract to sale, one of the questions I have is how would the buyer enforce it and against who?
Whenever I hear the phrase “we do it all the time” as the main answer to my questions and concerns, I get nervous. So should you.
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