The elements of a good real estate short sale purchase agreement are not really different than those necessary for any deal.
- Competent parties and signatures
- Adherence to current state laws
- Adequate legal description of the property
- A very clear statement of when seller will vacate and what items are included or excluded from the sale
- Contingencies for inspections and well-defined deadlines for them
- Contingencies for title research and discovery of liens
- A schedule of document deliveries and the obligation of both parties
Though many a real estate investor has been tempted to use an off-the-shelf office supply store purchase agreement, it is a really poor decision. Likewise, it is not a good decision to write your own or to use an online contract you find on the Internet. None of these are likely to be up-to-date with current laws in your state, and they aren't written with your best interests in mind.
Likewise, using the purchase agreements that the local realtors use isn't wise either. Two reasons:
- They are usually copyrighted by the Realtor Association, so you aren't legal in their use.
- A great deal of effort goes into making these agreements balanced and fair to both buyer and seller. You want an agreement biased in your favor.
The ultimate best solution is to use your attorney to draft a purchase agreement that protects your interests. And use an attorney who specializes in the practice of real estate law. Though you may need a divorce attorney if you lose your savings in a bad real estate investment, you don't want one for the preparation of your real estate purchase agreement.
If the homeowner comes back with a counter offer with changes to the language of your purchase agreement, you can have your attorney bless it or make appropriate changes for your counter.
The Real Estate Agent Option
There are real estate agents out there who are very experienced at short sales, though you'll need to search for them. It could be wise, even though there will be a commission involved, to seek one out and build a relationship. They can use their experience and mandated forms for contracts, and they can write up addenda as you specify to modify the agreements the way you want.
The average short sale also requires a bit of back-and-forth with the lender or the asset management company they hire. The agent can do the frequent follow-ups for you, freeing up your time to find another deal. They can handle counteroffer preparation and help you with getting information from the homeowner. By far, the documentation required from the homeowner is the biggest and most important facet of a short sale process.
You must make a clear case to the lender that the homeowner is moving toward default and that a short sale is a better way to go than foreclosure. The real estate agent can also help with a CMA, Comparative Market Analysis, that shows the property's value to be in line with your offer. Some lenders may give more credence to this professionally prepared CMA with a real estate agent's letterhead.
Consider all your options and the time and effort you want to devote to a short sale deal that may not make it to the closing table. The lender is in total control.