When is a short sale contract effective?
01/18/2017 | Author: TAR Legal Staff
I’m a broker with a sales contract that’s been executed by the buyer and my seller. The sale is subject to the lender’s approval. Was the contract effective at execution, or will it be effective when the seller obtains lender approval?
The contract was effective at execution. Even though the sale is subject to the approval of the lender, there is still a contract between the buyer and the seller. The effectiveness of the contract is not subject to lender approval, so the effective date should be filled in as with all contracts.
The Short Sale Addendum (TAR 1918) should always be attached to the contract in this situation to protect both the buyer and the seller because there is a contractual agreement between the parties where each has certain performance requirements and because the seller's ability to perform under the contract is subject to the lender’s approval. The addendum makes it clear that the contract is binding upon execution by the seller and the buyer, and that the earnest money and option fee must be paid as provided in the contract.
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