When Does A Short Sale Become a Binding Contract?
There is often confusion when writing a contract on a home or condo that is a short sale. Many people think you have to wait for an answer from the bank before you have a binding contract.
A Short Sale Contract becomes binding when the Buyer and Seller (not the bank) accept all terms of a Purchase & Sale Agreement and sign off on all Exhibits, Contingencies and/or Counter Offers. A Binding Agreement Date must be filled in on the Purchase & Sale Agreement or on the final Counter Offer and all timelines must be met within the terminology of the contract. Unless otherwise noted in the special stipulations of the Purchase & Sale Agreement or in the Counter Offer/s, all timelines concerning earnest money must be met and if the deal falls through a Termination & Release is still required and will need to be signed by both Buyer and Seller for earnest money to be disbursed.
***The banks approval is a Contingency to the contract and is most often secured by a Bank Addendum that must also be signed by the Buyer and Seller.***
So you will have a fully executed Purchase and Sale Agreement, with one outstanding contingency…THE BANK’S APPROVAL!!! When you will get that approval is anyone’s guess. So when writing your Purchase And Sale Agreement, you might want to put an extended date in for the closing, knowing full well it may be a couple months before you get a response. Your agent should also make sure you have an opportunity to terminate your agreement and have your earenest money refunded if there is no answer from the bank after a certain time. This is a negotiation point, and must be a date that both the Buyer and the Seller agree on.
Yes, short sales are a challenge, but if you are getting an incredible home or condominium, the wait may we well worth it.