Contract Drafting Tips for Short Sale Transactions

By Stephen L. Vinson, Jr., Esq.
Attorney at Law 

We are finding that more and more banks are becoming more uniform in what they require to be included in the purchase and sale contract for short sale transactions. We would like to pass on some of the items to you so that you can make sure that the contracts are drafted sufficiently from the onset of the transaction. This will help speed the short sale process. Here are a few examples:

  • Identify the parties completely and accurately.

    • Be sure individual’s names are complete and correspond with their photo ID such as a driver’s license or passport.

    • If an entity, print the entire entity name and include its jurisdiction (for example: ‘XYZ, a Florida limited liability company’) -If the entity is an LLC, please ask the party to provide you with a copy of their operating agreement, if any

    • If a trust, identify as follows: ‘John Doe, as Trustee of the John Doe Revocable Trust, dated xx/xx/xxxx and provide us with a copy of the trust when you send us the contract to commence short sale negotiations.

  • On the Closing Date line on the first page(s) of the contract, the banks now want to see an actual date as opposed to ’45 days from effective date’, for example. And, they are looking for a date 90-120 days out from the contract effective date. Please fill in an actual date. Then, on the Short Sale Addendum, fill in the same date. Again, write the actual date, not ‘xx days from…’

  • Consider the following when you or your clients are the Buyers in a residential real estate transaction:

If the _______________ contract is being used in the deal, there are three options in regard to who pays for which title related fees and costs. It is commonly accepted that a Seller is responsible for obtaining and paying for municipal lien searches. It is part of their obligation to deliver marketable title. However, under _________, the contract appears to obligate the Buyer to pay for lien letters. If you represent the Buyer, this option should be avoided. The contract is not drafted clearly and is subject to interpretation but if you select ___________, the issue is resolved. Also, in section ____, always fill in the blank with ‘municipal lien search’. This will ensure that the Seller pays for same. Remember, municipal liens are customarily Seller expenses so protect your Buyer clients from incurring an unnecessary expense.

Always remember that the Contract controls the transaction. It is important that the contract accurately reflects the parties intent. We are always available to answer any questions you might have in regard to contract preparation. Call us anytime if you need assistance.