A short sale addendum is utilized in the event a financial institution has an active interest the sale of a residential property, along with the seller. This addendum is used to document the banking institutions contingencies, along with the terms and conditions for the sale of the property. During a short sale, the financial institution is actively engaged due to the Seller being behind on their mortgage payments. Short sales may take as long as 6 months to finalize.
What to Include
- Clause regarding approval of the financial institution
- Disclosure regarding property inspection
- Length of time for the short sale
- Clause regarding multiple offers of the residential property
- Earnest money disclosure and return of it, if applicable
- Responsible parties for additional fees associated with the short sale
- Contract cancellation options
- Requirements for fully executing the contract
Short Sale vs a Normal Sale
While they are both similar in the overall home buying process, there are key differences between a short sale and the standard residential sale. The short sale heavily involves the lender that the Seller is associated with and thus requires their approval and cooperation for the sale. This is because the Seller owes more than what the home is currently worth on the market. Whereas a normal sale only requires that the seller be in agreement with the terms and conditions of the sale. In addition, a traditional sale can take 30-45 days to close and the short sale can last much longer. There is also the potential that with a short sale the property may need more work and require a lengthy number of repairs.
How Long Does Approval Take?
The short sale process certainly varies not only by state but by sale, as no two short sales are the same. Therefore, because each seller is in their own differing situations, this also adds to the complexity of the sale. The component that adds to the length of time of a short sale, is the type of lender the seller had and the number of loans that are active on the property. A short sale can take as little as 30 days and as long 6 months to finalize. However, on average it takes 4 months for the process to take place; 60 days to acquire approval, 30 days to sell and an additional 30 days to close escrow.