There are various rules and legislation that apply to the purchasing and selling of homes. Any sale of property may involve many legal considerations, including, but not limited to:
- Writing requirement: In general, real estate sales contracts must be in writing;
- All parties should sign the contract as well as abide by all applicable federal, state, and local regulations;
- Broker agreements: If the seller is collaborating with a broker, they must agree on the conditions of the sale, the broker’s fees, and other issues;
- Appraisals: An appraisal determines the value of a home. Hiring a qualified appraiser to establish the price can help avoid disputes about the home’s value;
- Loan requirements: The major subject of many real estate litigation is typically the home loan;
- An individual may want to look up the local loan eligibility conditions; and
- Disclosures: Up to a certain and reasonable point, a seller of a home only needs to disclose flaws;
- The buyer must determine whether the house has hazardous conditions or faults in various jurisdictions.
Many more real estate laws may be relevant when a home is for sale. The applicable laws may change depending on the sold property, such as a condo or townhome.
In addition, these laws may differ within specific zoning borders and even by state. Because of this, it is crucial to obtain professional advice if an individual intends to list their home for sale.
What Is a Short Sale?
A short sale is a type of property repossession that occurs when a home is sold at a lower amount than what the homeowner owes on their mortgage. A short sale is a foreclosure alternative that may be used when a homeowner or seller defaults on their mortgage loan.
A short sale may be favorable for borrowers because it may allow them to avoid various fees and other issues associated with foreclosures. A borrower, however, may still have a negative credit report following a short sale.
The unpaid balance owed to the lender after the short sale is a deficiency. Some states allow a lender to recover this amount using a deficiency judgment.
Other states, however, have anti-deficiency laws. These laws prevent a lender from collecting more than what was initially put up as security for the home.
What Are Short Sale Homes?
A short-sale home is a home that is being sold at a potential loss, with the proceeds going to the lender. Due to the pressure to sell a home in a short period, an investor often seeks a short-sale home.
Numerous issues may arise related to short-sale homes, especially related to the pricing of these homes.
How Is the Price of a Short Sale Home Determined?
Because a lender is interested in a home’s sale, they are typically involved in the sales process. A lender will probably be involved in the pricing of the home.
Most lenders use a broker price opinion (BPO) or best price offer analysis. The lender conducts this analysis to learn specific facts about the home, including, but not limited to:
- The age of the home being sold;
- The location of the home being sold;
- Whether any renovations were done to the house;
- Previous offers made on the house; and
- The fair market values and going rates for similar homes in the area.
One of the main issues related to a broker price opinion is that this opinion is conducted entirely on the lender’s terms. The lender uses their own forms and calculation process.
This process is different from obtaining an appraisal. A professional appraiser conducts an appraisal.
An appraiser must conform to local and state real estate standards that may make them more partial and unbiased.
Are Home Sales Transactions Subject to Legal Restrictions?
The sale of a home is subject to certain legal restrictions. Any real estate transaction or home sales contract must be in writing.
Under the fraud statute, all real property sales must be in writing. In other words, the court will not recognize an oral agreement to sell a house since there would be no written record of that agreement.
The provisions that pertain to the sale of a home are included in the real estate contract, which typically includes, but are not limited to:
- A legal description of the property that is being sold;
- The final sales price;
- The terms of payment; and
- Whether or not any property disclosures are required.
There are many real estate transaction contracts that are basic or boilerplate. Some, however, may have very specific clauses, for example, an exclusive right to sell or directions governing expansions or structural alterations.
An arbitration clause may be included in the contract that prohibits the parties from suing one another if a dispute arises related to the contract or any provisions contained in the contract.
What are Some Legal Issues to Consider with Short Sales and Short Sale Homes?
One of the most common legal issues related to short-sale homes is short-sale fraud. Short sale fraud can be engaged in by:
- A homeowner;
- A lender; or
- An outside third party.
This type of fraud usually involves using misleading or false information or withholding information in order to coerce a homeowner into conducting a short sale. Short sale fraud may also be used to defraud a lender of money that is owed under the mortgage.
Examples of short sale fraud may include, but are not limited to:
- Undisclosed payments;
- Flopping;
- Predatory short sale fraud;
- Falsified documents and certifications;
- Dishonest appraisals of the home’s value; and
- Non-arm’s length transactions.
Short sale fraud is a crime and may be punishable by:
- Fines;
- Suspension of professional licenses; and
- Jail time.
In addition, short sale fraud may lead to a civil lawsuit to recover the funds fraudulently taken. If a dispute arises related to the property’s value, hiring an outside appraiser who can provide some clarity and resolution may be helpful.
The appraisal process determines the property’s value using its market value and other factors. An appraiser must provide a neutral and unbiased conclusion as to the property’s value.
The final valuation is written in a detailed report that may be used as supporting evidence in some cases, such as a short sale fraud dispute.
Do I Need an Attorney for Help with Short Sale Homes?
If you are interested in purchasing a short-sale home or need to sell your home using a short sale, it is important to consult with a foreclosure attorney. It is important to note that a short sale can be made without the help of an attorney if there are no complications, such as issues regarding ownership or title.
If you anticipate that the short sale may be complex or disputes may arise, it is in your best interest to consult with a lawyer. Having a lawyer handle the sale is the best way to ensure that it goes smoothly and efficiently for everyone involved.
