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Help -why should buyer sign this counter??

Posted by Linda Baron on April 8, 2010 at 7:03am in Short Sale Discussions

In representing the buyer, a counter offer has just been received.  Contained in the counter offer and the most important issue:    "the seller reserves the right to cancel the contract if the priminary and/or secondary lenders requires the seller to execute any documents which subject seller to a deficienct judgement, promissory note, 1099 or any other post closing arrangment.  No fees or judgements will be due" 

 

WHAT AND WHY?  Listing agents -what are you doing ...trying to sell property?  Oh, really?  And why -why would anyone suggest that the buyer commit to 4-6 months or potentially more time to find out that the sellers lender is demanding a promissory note and therefore the contract is null and void?  What reason(s) and/or advice would you give to your buyer?

 

And why should I not just move on to another property. 

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Replies

  • Shannon M Thomas February 26, 2011 at 5:53am
    no 1099 though doesn't make since though as it has to be given for IRS purposes.  The bank would have no recourse but to decline.
  • Shannon M Thomas February 26, 2011 at 5:51am
    What the Selling agent is trying to do is put it on the bank if they accept the offer they have to accept the forgiveness of deficiency.   I don't see that it should add any more time to the bank, they either accept the terms or don',t of course they could counter with the clause being removed and then add more time.  Sellers are sometimes demanding that in their contracts with buyers, after all thats why they are doing a short sale to be forgiven and having a buyer is really the only leverage they have.
  • K April 8, 2010 at 11:29am
    I recently was involved as a buyer in a shortsale. The banked had countered our offer and we accepted. Once we accepted the counter offer, we got our inspection done and finance in place. A few days after that the sellers agent added an addendum to the agreement that had similar language and asked us to sign. We refused and they sent it to the bank anyway. Today we found out the bank will not agree to there terms of no promissory note, or 1099. So know we have no new house, and our out our money because the sellers agent did not inform there sellers of this being a possiblity. Atleast you have this information in advance that they are not willing to actually do a shortsale, which usually includes a promissory note, rather the sellers wanna walk away with no responsibility. I would stay away from these types of shortsales, seeing that the bank is most likely to do one of these things!
  • Bryant Tutas April 8, 2010 at 10:21am
    I actually think this clause is just redundant and makes no difference. The deal is probably already contingent on the seller agreeing to the terms of the short sale. If that's the case then this clause is just overkill and not necessary.
  • Sharon Horne-Ellstrom April 8, 2010 at 9:56am
    I do most of my short sales in Wisconsin, and most of the deals (hundreds now) all have language similar to what Jeff references above.

    This is quite different than what your buyer is being asked to sign Linda. I personally would counter with the language from Jeff above, but not all the "no deficiency, 1099 stuff". There is no reason for a buyer to agree to that, since these items are the foreclosing lenders rights (since the sellers have defaulted on their obligations in the first place).

    The good news is...there are plenty of distressed properties out there that don't require such contingencies.
  • Jeff Payne April 8, 2010 at 9:16am
    Is this something that the bank is asking your buyer to sign? Our short sale addendum in Florida is similar in my opinion, to paraphrase.... "Contract is contingent upon lender agreeing to short payoff and release and satisfaction of mortgage upon reciept of discounted payoff"
    Advice I do give to buyers is "Look for another property if you don't like the terms of this particular sale"
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