It’s important that anyone considering the need or desire to short sale their property know what the “Arm’s Length Affadavit” document is. Most banks will require this form to be signed at some point in the process of approving the short sale terms and/or at closing. In most cases the real estate agents will be asked to sign right along with Mr. Buyer and Mr. Seller. Holding your breath and hoping it doesn’t appear is not recommended.
The form will vary by lender but the guts of it will be the same. In order to get your short sale approved all parties involved will have to agree in writing that
A. The Seller will not remain in the home. Period.
B. The Buyer and Seller do not have any type of prior relationship. Meaning mom and dad can’t buy your house at a great price. Neither can your business partner or your brother, or…well you get the picture.
C. The Seller will not profit in any way in the sale. No cash changing hands on the side.
D. The Seller will not regain ownership of the home at a later date. A family member can’t buy your house and then give it or sell it back to you.
Clearly this is a form that has brought about heated debate in real estate and legal circles (whether it is legal, if and how it could be enforced, etc.) however it remains an issue on most short sales. This is not an inclusive list but a variation of what we’ve seen in the forms. Each bank has their own form with their own terms. This is not intended to be legal advice, it will be up to the parties involved in each transaction what they will or won’t sign. Some of the banks do not have this form at all.
For more information about short-selling your Temecula Valley home please email us at firstname.lastname@example.org and request a free copy of our “Short Sale Report”.