The Short Sale Process in NJ Has Changed
Over the past several years the short-sale process has changed; sometimes for the better and sometimes for the worse. These changes generally (i) involved the short-sale seller, short-sale lienholder, and the short-sale contractual purchaser and (ii) pertained to documents that needed to be provided by the short-sale seller or executed by the parties. However, recently there has been a change unlike the ones before, as it involves additional parties. The new change has to do with some short-sale lienholders requiring that the property be placed on an auction site, where multiple parties can bid on it. While those short-sale lenders view this as a benefit – as they submit they will truly know what the fair market value of the property is – short-sale sellers and their attorneys have mixed reviews.
The Auction Can Move Things Along
The positives for the short-sale seller is that the auction process tends to move along somewhat quickly once the parties have agreed to allow the property to be listed. It also is less intrusive as it may not require the property undergo a formal appraisal, which might require the appraiser entering the property. After all, value is what someone is willing to pay for it, and if several people bid on the property, the winning bid might just be the answer; hence no need for the formal appraisal and/or to enter the property.
The detriment is that many times the auction requirement is implemented after the short-sale seller is under contract with a third party. This is problematic for a variety of reasons. First there are potential legal issues (e.g., tortious interference with a contract). Without discussing the legal theories in detail or their merits, if (a) the contractual short-sale buyer refuses to allow the property to be listed via auction and the deal dies as a result of the same, and (b) the contractual short-sale buyer subsequently files a (a) civil action based on the auction requirement and (b) liz pends to be placed on the property, it could tie the property up for months, if not years. Second, there is a time element. Most of the time the short-sale process is not a short one. This is significant as both the short-sale seller and buyer have probably invested both time and money into the transaction. Adding another obstacle to go through after there is a contract between the parties, as well as the fact that many times the parties have spent time and money on the transaction, is generally not looked upon favorably by either the short-sale seller and/or buyer.
In light of this one suggestion for a short-sale seller when deciding to do a short-sale is to inquire with the short-sale lienholder(s) before listing the property, whether it will require that the property be listed on an auction site. If the answer is yes, the short-sale seller may want to see if a contract with a third party is necessary, and if not, the short-sale seller may forgo listing the property on the open market. This may speed up the time it takes to have the short-sale process completed successfully.
If the answer is unknown, then to be safe the short-sale seller should make that a provision to the contract that allows the property to be listed via auction should the short-sale lienholder require the same. This will reduce the likelihood of the contract purchaser raising any issues regarding the auction should the short-sale lienholder require the same.
The information in this blog posting is for general information purposes only. Nothing in this blog or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. The information in this blog is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.