Hi folks. Allison Stewart wrote a very good post this week titled WALK THIS WAY... CAN BUYERS JUST WALK AWAY FROM A CONTRACT?. Allison’s post is talking about Buyers who feel they can just walk away from a Short Sale transaction and get their deposit back because they are just tired of waiting. They feel the contract is not binding.

Here is my opinion on why Buyers feel this way. They are misinformed.

A Short Sale contract is no different than a regular contract with the exception of the 3rd party approval contingency. This contingency is related to the Lender approving the “Short” NOT approving the contract. The lender has no authority to approve the contract since they are not a party to the contract.

They do however have the authority to approve or disapprove the Seller’s request for a “Short” payoff.

A contract is binding and legally enforceable when:

1. It has a legal purpose
2. The parties are legally competent
3. The offer has been made and accepted
4. There is consideration
5. The parties have willingly consented to the terms

There may also be contingencies in the contract. Contingencies are: Conditions which must be met if a contract is to be performed.

Some contingencies may be to protect one of the parties:

1. Survey
2. Inspections

Some contingencies may need to be removed in order for the purchase to be completed:

1. Title
2. Short sale approval
3. Financing

The Short Sale approval is just one more contingency in the purchase contract. And just like any other contingency it should have a time period to be removed.  

If it can’t be removed in the time allowed then the parties can either extend the time period or cancel the contract and return the escrow deposit.

If it can’t be removed at all because the Short Sale was denied then the contract becomes  “null and void”. The Seller is now unable to perform. This is no different than when the Buyer’s financing is denied. He too is now unable to perform.

Folks....this stuff is NOT complicated. It’s Real Estate 101. Stop trying to complicate matters by treating the Short Sale as anything other than what it is…..a contract contingency.

If your Short Sale listings are not closing. Get training. You’re doing something wrong.

If your Buyers are getting frustrated then you are not setting the right expectations.