Short Sale Transactions with Real Estate

A Listing Agreement states that the owner agrees to convey marketable title to the buyer free from all liens. In a short sale, third-party approval may be necessary for the owner to comply with that provision.  The listing agreement should state that the seller's acceptance of any offer will be subject to the lender's approval of the offer without requiring that the seller bring cash to closing.

Offers to purchase the property would need the same caveat regarding lender approval.  This protects the seller against agreeing unconditionally to sell the property, only to have the lender disapprove the short sale.

Whether the owner or agent contacts the lender to find out if the lender will consider a short sale is a matter of office policy.  If the agent makes the contact, he or she should also request a list of documents that the lender will require. 

 The owner of the property and the potential purchaser of the property are the actual "parties to the contract" in a short sale.  Bank approval of the short sale is a contract contingency, and should be written as such in the agreement between buyer and seller.  Serious issues arise when the buyer and seller enter into a purchase agreement where the seller requires bank approval to deliver clear title, but the buyer was not notified of the contingency in the agreement. 

The owner of the property is responsible for all the usual disclosures of material defects in the property and in most instances will be required by law to give the buyer the Residential Property Condition Disclosure Form prior to the buyer's writing an offer to purchase.


Short sales present a variety of "risky issues" and should be handled with care and diligence.  The buyer must understand the timing issues involved, the necessity for third-party approval as a contingency, and the potential for the bank to ask for volumes of information from both seller and buyer. You want to work with an agent who has experience in short sales so that they know the right questions to ask to get the job done. I have successfully closed on every short sale transaction I was ever hired to represent. Call me if I can answer any additional questions for you on a short sale transaction. 

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