CHASE-ARMS LENGTH TRANSACTION

I received a HAFA approval and it has language for arms length transaction...I represent the seller.

 

The buyer is the seller's daughters mother in law...is this a problem?

 

Thanks from Pismo Beach.

 

 

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Permalink Reply by Jeff Payne on October 12, 2011 at 1:16am

Seller's daughter's mother in law?  I dont believe that there is any legal relationship there, at least they are not related in my opinion.  If the daughter was to get divorced, would they still be related?

Permalink Reply by Jeff Payne on October 12, 2011 at 9:23am

Harry, I re read it....  I first thought that the buyers agent was related to the buyers mothers first cousin twice removed or something like that.

I agree with you after re reading it.

DISCLOSE, DISCLOSE, DISCLOSE

Permalink Reply by Bryant Tutas on October 15, 2011 at 11:54pm

xx

Permalink Reply by Rodney Mason on October 16, 2011 at 1:59am

Yes, that would be a non-arms length transaction and there is a very good chance Chase will not approve the sale.   The relationship between the buyer and seller must be disclosed.  From the way this reads, the buyer is the mother of the husband of the seller's daughter. 

More often than not, when related parties attempt to purchase a short sale from one another, fraud is involved.  Their thought is that they save tens of thousands of dollars on the home and remain in it if they just do a short sale and have someone purchase it for them.  That is termed  as "Fraud for Profit".  I just took my CE class, so its fresh on my mind.

Permalink Reply by Loren Hoboy on October 16, 2011 at 3:20am

Arms Length: An arm's length agreement is one which is freely entered into by parties who don't have a special relationship or control over one another. An arm's length agreement is indicated by the fairness of price, conditions, and other terms of the agreement. For example, an agreement between relatives or agreements involving a deal on the side may not be considered arm's length agreements because they may not reflect the true value of the deal. [www.uslegal.com ]

There is no question.  This is not Arms Length.  Sell the property to someone else and find the mother in law a different property if she really wants to buy one.  Remember, you are signing the Arms Length Document too  and the penalties are high. 

Permalink Reply by ALLAN ARTHUR on October 16, 2011 at 4:40am

The Biggest challenge for the Bank is are the getting all they can for the property. Do you have multiple offers on the property? If not Price the property to allow the market place to define market value Mother in laws PP should be 5K higher than highest bid. As long as you have the seller permission you can disclose Bids. Disclose bids and ALL facts to bank  and let the Chips where they may.Be sure all bidders Know it is an open bid.

Permalink Reply by Loren Hoboy on October 16, 2011 at 5:10am

Good point.  Disclose and the Bank makes the decision.  While I am generally opposed to giving the bank multiple offers to consider (they get confused), in this case if you prove to them this is their best option (property on the market for 30-60 days and the relations bid is higher, you might have a chance.)

Permalink Reply by ALLAN ARTHUR on October 16, 2011 at 7:35am

You do not necessarly want to give them multiple offers, Have them in your file and tell them that they exist.you screened them and delivered to them the highest and best offer, that you have Marketed the property you recieved several offers, and the relative was willing to pay more, It is all about choice! theirs.

One note: The bank may not want the highest and best offer, They have been known to step over the$100.00 to pick up the $5.00. It is not their $$.

Permalink Reply by Bernadette Davidson CDPE SFR CNE on October 16, 2011 at 5:42am

It's a problem.  If you are questioning it, the bank will too.   I was told by BOA that listing my son's short sale would make it a non arms length transaction.   The familial status was disclosed in the listing and I was not a dual agent.  There was no relationship in any way shape or form between seller and buyer. My broker had to handle the transaction.

Permalink Reply by Kent Dills on October 16, 2011 at 6:49am

Vernice, this shouldn't be a problem as the buyer wouldn't be a blood relative as described.  The buyer's name, therefore, shouldn't bear any semblance to the seller's name on the contract and should just fly through the review process.  

Permalink Reply by ALLAN ARTHUR on October 16, 2011 at 7:37am

Disclose Disclose Disclose The banks are becoming highly sensitve to Fraud. Their definition will be different than yours!

Permalink Reply by Rodney Mason on October 16, 2011 at 3:02pm

The buyer and seller are related by marriage.  Blood or not, they are still related.  If the daughter has a child, both the seller and the buyer would be a grandparent to the child.  That demostrates a strong relationship between the two parties.  Not disclosing the relationship could open all parties involved to a possible mortgage fraud involvement.

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