![]() ![]() ![]() So, let’s assume that the Seller, who purchased the property for 500K ($150K down and $350K mortgage), and then sold it as short sale for $250K, comes in 3 years and buys the same property for $400K. An arms-length transaction is required in real estate deals to assure that the property is being sold at fair market value, not at some artificially low price. The idea is to prevent the Seller from profiting from short sale. The Buyer should not be liable, should s/he?Īnd another question. Am I correct assuming that it is not the problem for the buyer, who may inadvertently sell later to the Seller or members of his family for as long as s/he has not conspired to commit the mortgage fraud. (Elizabeth – hint, need an autograph, please).ĭone with the question ? Not quite. Pleasant surprise, it was one of my AR favorite bloggers Elizabeth Weintraub, the short sale guru from Sacramento, and the article was posted on. I liked the article and looked who the author was. So, I Googled it, and the first article I ran into ( Why Does the Bank Require an Arms-Length Affidavit on a Short Sale?) explained that if the Seller later repurchases the property, this could constitute mortgage fraud, and it will be in the jurisdiction of FBI. We either go to Active Rain, or you go to Google. What do we all do when we do not know something. And I do not know how actually this works, how it is enforced. He asked me that would he need to do investigation to see that the future buyer is not the Seller, nor his relatives or business associates.Īnd I started thinking about it. It can happen 2 years from now, it can happen 5 years from now, it can happen 6 months from now (though unlikely). He would sell it when he can get the profit he is looking for. ![]() He did not have a slightest idea who the Seller was anyway.īut he is an investor. What the heck was that? I told him about relationship between the Buyer and Seller, and me as the agent. I signed for me and sent to both the Seller and the Buyer. The lender sent us the Affidavit of Arm’s Length transaction. The South Florida luxury residential real estate attorneys at Schecter Law have represented the buyers, sellers, brokers, and developers in connection with the acquisition, development, and sales of luxury residential real estate since 1976.I am getting close to closing on a short sale where I have never seen the buyer, and I have never seen the Seller. Involving an experienced lawyer early in the transaction will help prevent entering into an agreement without the necessary disclosures. While seller’s disclosures have become a part of residential real estate transactions, many issues still arise over the course of a real estate transaction. However, the doctrine still applies to commercial real estate transactions. Seller’s disclosures are provided in many residential transactions. Today, caveat emptor no longer protects a seller in a residential real estate transaction. Applying caveat emptor in favor of a seller would not always be fair. The courts recognized the purchase of a home is not an everyday transaction for the average family and that a residential purchase may be the most important transaction in a person’s lifetime. The purchase of residential property is a large economic investment. Fannie Mae allows non-arm’s length transactions for the purchase of existing properties unless specifically forbidden for the particular scenario, such as delayed financing. Sellers were often in a better position than buyers with regard to defects. Non-arm's length (NAL) transactions are purchase transactions in which there is a relationship or business affiliation between the seller and the buyer of the property. Over time, the courts realized that real estate transactions were not always arm’s length. An arm’s length transaction meant both the buyer and seller had equal knowledge concerning the property. The principle behind caveat emptor was that the transaction was “arm’s length”. A seller had no duty to communicate the existence of latent defects unless the seller represented that such a defect did not exist. A purchaser bought real property at his or her own risk. The situation presented is indicative of a fair market value, arms-length transaction made by the owners of the property for the purpose of leasing/selling. The seller of real property was not liable or responsible to the buyer for a defective condition in the real property that existed at the time the seller transferred possession to the buyer. The doctrine of caveat emptor was the rule of law governing disputes from the sale of residential real property. ![]()
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