What is an Arm’s Length Short Sale?
In a short sale transaction, homeowners are basically being let “off the hook” for part of their mortgage balance. As you can imagine, this opens the door to many fraudulent behaviors, so banks are being extra careful to make sure homeowners aren’t committing fraud against them. What would this fraud look like? Imagine a struggling home owner. His wealthy father purchases his home as a short sale at 35-40% of the original loan amount on the home. Then he transfers the title back to his son. This would allow the son to skip the modification process and also give him an unfair advantage over other homeowners.
Banks have been combating this by having all parties sign the Identity of Interest Certification form. This confirms that neither party is related by family, by business or by marriage. There might be special circumstances where in a bank would allow such a transaction. If a home has been on the market for an extended period of time and is facing foreclosure, for instance. Under this situation a bank would likely ask the parties to sign an agreement that the home would not be sold or given back to the original home owner.
If you are facing foreclosure or are considering a short sale, contact The CHRIS WYLIE TEAM today to see what options might be available to you.