Assignable Contracts & Specific Buyers

Please be advised that short sale lenders are getting very strict about approving the specific buyer identified on the contract. As such, lenders are carefully scrutinizing assignment provisions in contracts. Short sale lenders who are reviewing contracts (that permit the contract to be assigned) are kicking back the contracts more and more frequently.)

Lenders are also increasingly approving the specific buyer on the contract. What that means is that lenders are not permitting last minute buyer changes or additions. If your buyer attempts to add a buyer or change the name, that is increasingly causing lenders to require the parties to begin the short sale process from scratch.

As such, to maximize the chances of getting your short sale approved and avoid delays the process, we strongly recommend (a) that any contract you submit for short sale approval NOT be assignable, and (b) that you make it clear to your buyer that there can be absolutely no changes to the name of the buyer whatsoever, including the addition of last minute parties and/or last minute entity formation.

Finally, please be a bit wary of submitting offers from corporate buyers who do not appear to be end users. While you may need to do so, please be advised that Berlin Patten had a recent instance in which a lender actually revoked an approval due to its belief that the corporate buyer was a flipper. The sole basis for such conclusion was the fact that the buyer was a limited liability company that had bought (but not sold) other parcels recently.

While we strongly disagree with the lender’s approach and rationale, it is clear that lender’s do not like to approve short sales where they believe the property might be immediately flipped for a higher amount. They are carefully scrutinizing any transaction that has red flags (at least in their opinion) and appear to be more than willing to run the risk of rejecting legitimate deals to weed out transactions that they feel are flip transactions.

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