Sign This Short Sale Addendum or I Won't Submit Your Offer to My Seller
I'm seeing more and more of these types of short sale addendums in the Gilbert AZ area. The listing agents are writing addendums that are non-negotiable.
They add a clause in the sellers listing agreement instructing the agent to not submit incomplete offers. An offer without the addendum is incomplete.
These are the terms that are in some of the addendums I've run across:
- Must deposit $xxxx earnest money on signing of contract, non-refundable for 90 days
- Seller can cancel contract at any time if they elect to not do a short sale.
- Must use sellers title company (Note: AZ is a buyers choice state)
- Buyer will pay to turn on all utilities and be responsible for any damage that may occur as the result of turning them on.
- Any personal property left on the property is a gift to the buyer
- Buyer agrees that lender will not pay for termite treatment if termites are found
- Buyer agrees to pay banks per diem charge if they don't close by the banks selected closing date
- Buyer and buyers agent must sign this addendum that agrees to the terms.
- Offers will not be submitted to the Seller if this addendum is not included with the offer
I would like to get others opinions on these types of non-negotiable listing agent short sale addendums.
How does this addendum benefit the seller?
How does it benefit the buyer?
How would you advise your buyer?
Would you use one of these type addendums and make it non-negotiable? If yes, Why?
Would you attenpt to negotiate the addendum with the listing agent? If yes, How?
As a buyers agent, which terms, if any, could you recommend your buyer accept?
As the listing agent, which terms, if any, could you drop? Why?
Would you sign this short sale addendum? If yes, Why. If no, Why Not?
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Bill, these are great questions you ask. I list short sales, and unfortunately, I have had to resort to non-negotiable addendums to the purchase contract. There have been many times buyers have left my sellers twisting in the wind when they decide to walk and buy something else without informing us. The only difference between a short sale and a standard sale, is there must be lender approval and the fact that most sellers don't have any money to make repairs.
As far as buyer paying for utilities, yikes, that's one I think is the Seller's responsibility. It doesn't cost that much to keep utilities on. Great post, I suggested.
We have a two page Short Sale Addendum, written by our local association that spells out time for agreement, contiuned marketing, when inspection time frames start that I find very helpful. The banks, of course, typically have their own, ususally stating the transaction is arm's length. h
Title company part looks like it may be a Federal and State Antitrust violation.
Our local association has an addendum for buyers to sign but it is not similar to what you mention...I can't wait to see what others say...
We have a short sale addendum but it is nothing like the ones you describe. I would have a hard time advising a buyer client to sign an addendum such as you describe. I would certainly made appropriate changes and attempt to negotiate the terms of the addendum.
As far as myself signing as an agent, I don't think I would. The sales agreement is between the buyer and the seller and the Realtor is not a party to the transaction.
Larry, it's a RESPA violation:
Section 9: Seller required title insurance
Section 9 of RESPA prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale. Buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance
http://www.hud.gov/offices/hsg/ramh/res/respamor.cfm#HE2
Pamela, what are some of the terms in your addendum?
Also, since instituting the non-negotiable addendums, has your Sold to Cancelled + Expired ratio increased? The reason I ask this question is I see some low ratios for agents who use a non-negotiable addendum, and I believe it's because smart buyers agents are not going to let their clients get tied up unless they have sufficient knowledge about the sellers situation and the listing agents short sale knowledge to believe the sale has a chance to be approved. Consequently, my personal opinion is that non-negotiable addendums can cause a lot of qualified buyers to pass on the property.
Carol, Dennis, AZ also has a short sale addendum, which is very good in my opinion.
Tony, I won't sign as a party to the agreement either. Buyer clients may very well elect to sign an addendum against their agent's advice - because it's their choice. If the agent signs the agreement, it then expresses that the agent is in agreement with the terms of the addendum, when in fact s/he has advised the client to not accept the addendum.
We get those addendums here in Virginia, which also is a buyer's choice state. The addendum does not trump state law and it has never been an issue. Even though they state that they will not make any repairs, my buyer can walk as they will not qualify for financing if the termite and/or moisture damage is not corrected. And the seller has to now disclose a latent defect in the house. I have succeeded in getting repairs each time this has come up, even though this addendum was in the package. Of course, the buyers have to be willing to walk. I did have one where they said we would not require any repairs resulting from the home inspection and I crossed that out because they had already agreed to them. No one flinched at that one.
Kathryn, the buyers choice is also a RESPA requirement. However, that does not prevent a buyer from agreeing to a sellers "request" to use the sellers title company.
In a negotiated contract, the buyer may be willing to give the seller the title company in exchange for something else. But in a non-negotiable addendum there are no exchanges.
The big issue is when an agent has a list of items in a non-negotiable addendum. And they have written permission from the seller in the listing agreement to not present offers without that addendum. And they are adamant about not presenting it. And they're protected because of the listing agreement language.
If the buyer agrees iin the addendum that the lender or seller will not pay for termite treatment, and there is damage, and they cannot get the mortgage unless it's cured, and the buyer won't pay for it, then the buyer "man" lose the earnest money if they walk on the termite issue because they may be in breach of the addendum they signed relieving the seller and lender from the responsibility.