As Richard points out there are vast differences in the two. As your Florida Short Sale Broker I will make sure that the right addenda are used and that the Short Sale Purchase Contract will protect you.
And since I am NOT an Attorney and cannot give legal advice I will let Richard's explanation below do it for me.
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I last addressed the common Florida short sale addenda in WHAT'S WRONG WITH THE FAR SHORT SALE LISTING AND CONTRACT ADDENDA - AND HOW YOU CAN FIX IT in November 2008. Since that time several real estate brokerage agencies have recognized the FAR "oversights" and created their own short sale addenda. In June and December 2010 we saw major changes in the forms used by the majority of Florida brokers. This article will discuss the good, the bad and the ugly.
The FAR 2007 Exclusive Listing Agreement will not be discussed - it is the same as discussed in the above article, to the best of my knowledge. The problems with it remain the same - but are now more seriously carried over to the short sale contract addendum by FAR.
The FAR Short Sale Addendum under date 12/2010 is even worse than the previous versions if you are a Seller. Here is the form, and my comments will follow:
In paragraph 1 the language is basically unchanged from before. There is the ambiguous (at best) statement that the Contract is contingent on the Seller's Lender approving the (1) purchase price, (2) terms of the Contract, (3) the settlement statement, and the agreement by the Lender to provide a release of its lien. The paragraph uses the words "release and satisfaction", but "satisfaction of mortgage" documents can say a lot of things - and one of them is that the lien is satisfied but the indebtedness is not released and still due. In fact, one bank has taken issue even with a "Satisfaction of Mortgage" document recorded with the Clerk that contains language that the "indebtedness is paid in full" - saying that the short sale approval letter that did not specifically provide a release of indebtedness takes precedent over the later recorded satisfaction document! Until that is settled by a court, I would NOT want my Seller client to rely on the language in paragraph 1 of the short sale addendum that the seller is being released of any indebtedness.
In fact, skipping down to paragraph 5, the Seller is actually acknowledging that Seller may have to bring money to the closing or even be obligated for a deficiency and may have a judgment entered against Seller for that money - yet in the same sentence the document talks about the Lender's forgiveness of the deficiency! Confusing and why? Misleading is more like it!
Jumping back to paragraph 3, the first checkbox (which is what most agents use) says that the no deposit is due under the Contract until the Lender Approval. I am a firm opponent of no deposit contracts, yet this FAR form encourages just such conduct. We find that 90% of no deposit contracts end in failure - often from the buyer disappearing without even telling their agent. Without a deposit to even ask to be returned upon Buyer's cancellation for the broad post Lender approval inspection, the buyer simply never tells anyone that it walked from the contract perhaps months prior. See NO DEPOSIT CONTRACT - IS IT A CONTRACT?
The FAR/BAR contract form from June 2010 is a different story - it addresses all the issues raised in my article What's Wrong With The FAR Short Sale Addendum (see link above). Here is a copy of it.
(I have left out the 2nd page as it is not germain to this discussion)
Paragraph 1 (in the second paragraph) states in its middle sentence that if the Lender does not provide a complete deficiency release, or if the Lender requires something of the Seller that the Seller does not approve, then the Short Sale Approval is not a short sale approval under the Addendum. Perfect! The Short Sale Approval is not a valid approval unless ACCEPTED by the Seller.
In Paragraph 5 the issue of the deposit is addressed. The deposit (at least the initial deposit) is specifically removed from the contingencies of the Short Sale Approval. Perfect again! It is the Effective Date that creates the timeline for those preliminary things and obligations.
Both agents and their clients (especially Sellers) need to understand these forms BEFORE they are offered by the agent as part of the Contract documents, and by the Seller and Buyer BEFORE they sign them. The differences in the two forms are vast and of tremendous importance in their obligation requirements of the Seller.
Copyright 2011 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 email: RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com .
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