Arm's Length Question
I was contacted this morning about handling an unusual short sale. The wife and husband who now live in the property are divorcing. The wife is not on the loan or deed. The husband and his brother own the property. They are about six months behind on payments and would like to short sale the house. The wife's aunt would like to buy the property. She and the divorced wife (niece) would then live in the house. Seems very close to violating the "arm's length rule." Will appreciate any feedback.
Glenn Batten
Charleston, SC
Replies to This Discussion
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Permalink Reply by Wendy Rulnick on
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It does not sound ARM's length. I would tell them or show them the standard addendum from whichever lender they have.... Then list it and get it sold to someone else. If they are insistent that it is not ARMS length, have them get advice from an attorney.
This is from Bank of America's short sale addendum:
The Parties acknowledge and agree that the Subject Property must be sold through an “Arm’s-Length” Transaction.
“Arm’s length” means two unrelated parties characterized by a selling price and other terms and conditions that would
prevail in a typical real estate sales transaction. No party to this contract is a family member, related by blood or
marriage, business associate or shares a business interest with the mortgagor (Sellers).
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