If you are working with buyers and lenders on a short sale, there may be some lender imposed conditions that you may find troublesome, but any deviation from you following the terms of the estoppels letter or short sale agreement can jeopardize the purchase.
It is very important that your clients follow the rules and conditions set forth by the lender. If the lender feels you may be skirting the rules and you as the agent don’t do anything about it both of you could face civil or criminal charges. This is not something that should be taken likely; below we review the most common lender conditions:
Limit on earned commission: Lenders have the right to limit your commissions on short sale transactions, and most lenders feel a realtor should take less commission to make the deal work. Any other compensation’s to the realtor without the lender’s approval would violate the contract and you risk losing the whole deal. Don’t be greedy!
Notably the two most restricted lenders would be Fannie Mae and Freddie Mac there is a cap to commissions set to 6%
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Property must be owner occupied: If you have a buyer looking to buy a short sale, it must be their primary residence. In the lender’s view if a investor was to buy the home it would be because there is some hidden equity, which in the eyes of the lender that equity should be going towards the payoff of the loan. However, if a buyer has full intent of owning the home, but soon after the closing decides to rent it out, they could be breaching the lender’s terms of the contract and could face legal action.
Property Flipping: The lender will want to have been given the best price offer for the property. Property flipping is looked down upon by the lender and could be considered fraud. While it may make sense to the buyer to buy as low as possible and flip the house for a small profit, certain government programs prohibit the reselling of a home under the HAFA program Home Affordable Foreclosure Alternative program, the federal government has restrictions and the resale of a property cannot happen until 90 days after the purchase.
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