The Sellers Violated the "Arms Length Transaction Notice", Now What?
Hi folks. Last year I had a closing for one of my Orlando Short Sale listings. This particular lender required all parties, including the agents, to sign an Arms Length Transaction Notice. This notice basically states.....well here it is. Read it for yourself.
Of course as an experienced Orlando Short Sale Agent and negotiator I explained this notice to the Seller not only at time of listing but also when it was received and before it was signed. It wasn't an issue as the Sellers were moving anyway and they certainly didn't know the Buyer. All parties agreed to the Arms Length Transaction Notice and signed it. Shortly thereafter the transaction closed and all was well.
Recently, and several months after closing, I was driving around and bumped into the Sellers. They were standing in the front yard of their old house. The one we did the Short Sale on!!
I pulled over to say "Hi" only to find out that they did not move and had signed a lease with the Buyer. I guess this all went down after closing. YIKES!!!
So what do we do now? Will the lender find out? Can I be held liable for an act I wasn't aware of? Can the Short Sale be rescinded?
Comment
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Comment by Lisa Henderson on January 31, 2011 at 5:16pm
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In California, the short sale could probably be rescinded. It happens here more often than people know. But I can't imagine that you could be held liable.
Responding to the comments below....they may NOT have known. The Buyer may have contacted theSeller after COE, wanting him to move out, or vice-versa, and after talking, decided that this is a win-win for both. Buyer wants a tenant, Seller wants to stay in a home and neighborhood that he loves and where his kids are established.....etc.
And I personally don't believe that you have an obligation to report anything unless you know the circumstances. Just my opinion.
If you are worried about it, just ask them how it happened and remind them that they signed a notarized document saying that they did NOT have a deal and didn't disclose this to YOU. And that they are both guilty of fraud.
If they knew.....well, JERKS!! Not your fault on any level.
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Comment by Jeff Payne on January 15, 2011 at 6:05am
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You did not violate the Arms length transaction clause because you did not have any agreement and did not know of any agreement that allowed the sellers to stay in the home. Question is.... do you have an obligation to report it?
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