Purchasing a home under normal circumstances can be a complex process. The transaction, however, can become much more complicated when distressed properties are involved. A short sale transaction requires a short sale addendum, wherein the term “45 days” can be significant for several reasons.
The short sale addendum outlines several details of the transaction, including any contingencies that would invalidate the contract, the required timelines for lender approval and transaction closing, and the release of the earnest money deposit. The addendum also specifies whether the seller can entertain other offers for purchase after entering into the short sale transaction. Additionally, the addendum usually states that the lender is not part of this initial contract and that terms are subject to change depending on the lender’s requirements.
In some states, the default time period for gaining lender approval of the short sale transaction is 45 days. This means that the buyer and seller must wait 45 days from the time that they sign the short-sale contract to get the sale price approved by the mortgage lender. If this approval does not come within the 45-day period, the buyer or seller is free to terminate the short sale contract. While 45 days is the default timetable, buyers and sellers can agree to different terms if they wish.
Notification of Lender Approval
When a lender approves a short-sale transaction, it notifies the seller or the seller’s real estate broker. The short sale addendum specifies the time period in which the seller or seller’s agent must notify the buyer or buyer’s agent that the transaction has been approved. The seller usually is required to deliver the lender approval to the buyer within seven days of receiving it but no later than 45 days from effective date, which is the date the buyer and seller signed the short sale contract.
Close of Escrow
The short sale addendum specifies the time period that the contract is valid at the offered sale price. While buyers and sellers can agree to their own timetable, the default time period for closing the transaction is 45 days. This time period does not start at the time that the buyer and seller sign the sales contract. The 45-day period begins after the lender has agreed to the sales price and the seller’s agent has informed the buyer’s agent of this approval.
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