Here’s a complete list of possible questions about the Short Sale Addendum, along with explanations for each:
- What is the purpose of the Short Sale Addendum?
It sets out the terms of the purchase agreement when the sale is contingent upon the seller’s lender(s) approving a short payoff—selling the property for less than the total debt owed.
- Does the Short Sale Addendum make the contract binding before lender approval?
Typically, the agreement is not fully binding until the seller’s lender(s) approve the short sale, and the addendum clarifies this condition.
- How long does the buyer have to wait for lender approval?
The addendum allows the parties to set a specific time frame within which the short sale approval must be obtained before the buyer can cancel.
- Can the buyer cancel before lender approval is received?
The addendum usually specifies whether the buyer can withdraw for any reason before approval, or only after a certain period or specific conditions.
- What happens if the lender denies the short sale?
If the lender refuses, the contract is generally void, and the buyer’s earnest money deposit is returned—this is spelled out in the addendum.
- Does the seller have the right to continue marketing the property?
The addendum can address whether the seller may continue to solicit and accept backup offers while awaiting lender approval.
- What contingencies remain in place during the short sale process?
Even with a short sale, the buyer typically retains contingencies like inspection, appraisal, and financing unless otherwise waived.
- How does the lender’s approval affect closing timelines?
Since lender approval can delay closing, the addendum should state how closing will be scheduled after approval is received.
- Who pays for fees and closing costs in a short sale?
The lender may limit or dictate which costs can be paid from sale proceeds; the addendum often outlines that these terms are subject to lender approval.
- Can the buyer request repairs in a short sale?
Lenders typically sell short-sale properties “as-is,” and the addendum may clarify whether repair requests will be considered.
- What happens to the earnest money deposit if the lender takes too long to respond?
The addendum may define when and how the buyer can recover their deposit if delays exceed the agreed-upon time frame.
- Are there multiple lenders that must approve the short sale?
If there is more than one lienholder, the addendum should note that all must approve before closing can proceed.
- Does lender approval override terms in the original purchase agreement?
The addendum often states that lender terms may supersede the original contract provisions, and the buyer must decide whether to accept them.
- Can the seller’s lender require the buyer to use a specific escrow or title company?
Some lenders impose these requirements, and the addendum should disclose if such terms might apply.
Disclaimer:
The questions and answers provided are for general guidance only and may not cover all details or apply to every situation. If anything is unclear or you need further clarification, please visit car.org for official resources and the most up-to-date information from the California Association of REALTORS®.
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