BANK OF AMERICA NEW SHORT SALE CONTRACT PACKAGE
In the never-ending revision of lender rules for short sales, Bank of America recently released a new package of documents preliminary to considering a short sale of a mortgage held or serviced by them. This package of documents eliminates the preliminary arms length affidavit that was in use for a period of time in the late Summer 2011through Winter 2012, and essentially was preliminary to a final arms length affidavit about which I have written several blogs:
Here are the individual pages with my explanation of what each says.
BUYERS ACKNOWLEGEMENT AND DISCLOSURE
This first page, below is the BUYERS ACKNOWLEGEMENT AND DISCLOSURE. It is signed only by the Buyer. The first part of the document deals with who cannot buy a Bank of America short sale. It has the Buyer affirming that he or she is not in any way related to Bank of America, that no close relatives of the Buyer are so related (including a dependent child that lives with a Bank of America employee or any other person that derives primary means of financial support from a Bank of America employee. [I can imagine a simple scenario – the gardener or housekeeper for a Bank of America employee would be barred from being a purchaser if that person receives primary income from that job].
The next part of this document has the Buyer certifying that there is no affiliation or relation of the Buyer to any Bank of America entity; and the Buyer and no spouse or domestic partner or dependent child and they do not obtain from Bank of America or any of its employees any primary means of financial support; and Buyer is not doing any work for Bank of America as an agent, broker, appraiser, attorney, trustee or anyone who does these things – including those that do BPO’s or property inspections. This one is pretty straight forward and it almost sounds like disqualifying winners from a sweepstakes contest.
SHORT SALE PURCHASE CONTRACT ADDENDUM
The next document is the Short Sale Purchase Contract Addendum. Essentially this is just “another” addendum to the Purchase Contract that will “amend, modify and supplement” the Purchase Contract. But look more closely. The Purchase Contract is probably already an “As Is” contract, but this addendum reasserts that condition. The addendum also states that following conditions apply to the Purchase Contract: (a) Seller may cancel without notice prior to closing; (b) the transaction is at “Arms’ Length”, meaning the Buyer and Seller are “unrelated” (not a family member, related by blood or marriage, business associate or shares of a business interest with the Seller) and the price is fair market value as well as other terms; (c) there are no oral or other written agreements between the parties OR THEIR BROKERS that will permit the Seller or any Seller family member to remain as a renter or occupier of the property or regain ownership AT ANY TIME after the closing, including any option to purchase; (d) The Seller will vacate the property by a certain date; (e) Neither Buyer nor Seller are getting proceeds from the transaction; (f) No option to purchase (even by a 3rd party, meaning a flip or beneficial trust deal), assignment or assignees may exist; (g) No transfer of the property until more than 30 days from closing; (h) There is no appraisal fraud, flipping , identity theft or straw buying involved; (i) Any mis-statement or misrepresentation of fact that Bank of America relies upon is Short Sale Fraud and may subject the responsible party to criminal and civil prosecution; (j) That this addendum and the Purchase Contract are the only documents that make up the Purchase Contract.
That is a pretty comprehensive list and it seems that this is designed to supersede and replace the Arm’s Length Affidavit that has been in use in one form or another for the past year. The significant difference is that these representations are not in affidavit form, but they would be binding none the less. Another significant issue is that this document would negate any other addenda or amendments to the Purchase Contract. Most Realtor Boards have some standard forms for short sale addenda, and of course there are the other “Comprehensive Addendum” for FHA/VA, Condominium/HOA, Mold, and such. The drafter of a Purchase Contract needs to be careful to specifically state in the Purchase Contract that these other addenda together with the Purchase Contract are the Purchase Contract, and that statement needs to be made in the Purchase Contract. In Florida, the Florida Realtors/ Florida Bar form almost covers this in paragraph 19 (The following additional terms are included in the attached addenda and incorporated into this Contract). Some of the items to be checked in that paragraph list of forms are “Riders” and some are Addenda. Taking the Bank of America language strictly, the other addenda are not part of the Purchase Contract. So should they all be called or renamed to be “Riders”? This is too new to draw an opinion. Suffice it to say that the entirety of all short sale contract documents need to be sent to the lender and they need to be acknowledged as having been received by the lender. Perhaps a statement in the next (usually “additional terms” blank to be filled in paragraph 20 should read, “This Purchase Contract along with the documents marked in paragraph 20 and the Bank of America Short Sale Purchase Contract Addendum together make up the entirety of the Purchase Contract”. If the lender accepts the contract, they accept that language as well.
The next form in the new Bank of America Short Sale package is the Short Sale Real Estate Licensee Certification. Here the Buyer and Seller real estate agents (called “Real Estate Licensee” make specific statements. The statements are: (a) That Bank of America is not the Seller and is not responsible for paying real estate commissions[but see when the lender can be liable -SHORT SALE LENDER CANNOT REDUCE COMMISSION TO BROKER] ; (b) the agent’s license is current and valid; (c) the Seller’s agent “certifies” that the property has been listed on MLS at “a listing price intended to generate open market competitive offers…” and “not at an artificially low or high listing price” and that the agent’s “marketing efforts” were “in spirit aimed toward maximizing the selling price… from a ready, willing and able buyer”, and agent has not engaged in any conduct that restricts or limits offers from buyers such as (without limitation) requiring cash offers, using disparaging language regarding the property or tenants or unreasonably restricting access. [An obvious problem here is that in the standard short sale addenda used by most agents and provided by most local or state boards, there may be restrictive language on the continued showing and taking offers once a contract is signed by a Buyer and the Seller. This lender required statement clearly conflicts with that standard language]; (d) The agent has not coerced Seller to accept one offer over another and Seller has been made aware of all offers; (e) The agent is not engaging in appraisal fraud, flipping (as defined by the FBI), identity theft or straw buying, and all agreements relating to the “current sale or subsequent sale of the property” which agent IS AWARE OR SHOULD BE AWARE have been disclosed, and agent has no knowledge of any agreement for resale of the property within 30 days or any option for the Seller to purchase the proprety; (f) Agent states that no compensation except as stated on the HUD-1 is being paid and Seller, Buyer, agents or other lien holders are not getting any compensation or other remuneration except as stated on the HUD-1; (g) Full disclosure has been made by the agent to Bank of America of any known relationship to Buyer and any known relationship to Seller; (h) Agent understands that misrepresentations or omissions made of material facts may subject agent to civil or criminal liability.
The Bank of American Short Sale Purchase Contract Addendum seems well intentioned and apparently is to obviate the need for the arm’s length affidavit – but this has yet to be seen as the new Addendum is so new that I have not yet gone all the way to a closing with one. We will have to see if Bank of America will then also make the Arm’s Length Affidavit (in affidavit form) a part of the closing package. Is this new documentation just a precursor to what we have been using in the past? And if so, is the purpose to button up perceived loopholes for those that seemingly make up their own rules on the meaning and effectiveness of the arms length affidavit – or maybe it is to work an improved dragnet for agents willing to “hear no evil, say no evil” regarding their investor’s or Seller’s true intentions?
Copyright 2012 by Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader. Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com
See our easy to find articles at TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
I hear they've changed the Short Sale Authorization to add assistants and paralegals.