In real estate, a short sale occurs when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor (i.e., the seller). Circumstances determine whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower's financial situation. A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing.
An arms-length or short sale affidavit is a document created by a bank in an attempt to prevent sellers from selling to relatives or friends to act as a straw buyer. Sometimes sellers make such side agreements. Then, after the transaction closes, the pretend buyers quickly transfer title back to the seller. This practice, in affect, means the sellers have repurchased their home at maybe half the cost, which greatly benefits those sellers.
A Wisconsin Short Sale or Arms Length Affidavit is a document used in real estate transactions, specifically in the context of short sales, to ensure transparency and fairness between parties involved. It is designed to protect against fraud, collusion, or any other unethical practices that may affect the sale price or to provide an accurate representation of the property's market value. In a short sale, when a homeowner is unable to pay off their mortgage and decides to sell the property for less than the outstanding mortgage balance, the lender typically requires an arms' length affidavit. This affidavit confirms that the buyer and seller are unrelated parties and that no hidden agreements, financial incentives, or negotiations exist outside the standard transaction. The Wisconsin Short Sale or Arms Length Affidavit serves as a legal declaration by both buyer and seller that they are not relatives, business partners, or share any common financial interests. By signing this document, they confirm that the transaction is made in good faith and without any intentions to manipulate property value, mislead the lender, or gain personal benefits. Different types of Wisconsin Short Sale or Arms Length Affidavits may exist due to specific circumstances or requirements imposed by the lender or state regulations. These may include: 1. Standard Wisconsin Short Sale or Arms Length Affidavit: This is the most common type, used in regular short sale transactions to ensure a fair and transparent sale process between unrelated parties. 2. Multiple Property Affidavit: In situations where a buyer is purchasing multiple properties from the same seller, this affidavit confirms that each transaction remains arms length and independent of one another. 3. Investor Affidavit: This affidavit is often required when an investor purchases a short sale property. It asserts that the investor doesn't have pre-existing agreements or incentives with the homeowner, further ensuring an arms-length transaction. 4. Non-Profit or Governmental Agency Affidavit: In cases where a non-profit organization or governmental agency purchases a short sale property, this type of affidavit ensures that the buyer and seller have no conflicts of interest and that the sale is conducted fairly. It is crucial for both buyers and sellers involved in a Wisconsin short sale transaction to understand the significance of the Arms Length Affidavit. Any fraudulent activities or misrepresentations can lead to severe penalties, legal consequences, or the voiding of the sale transaction. Therefore, it is recommended to consult with a real estate attorney or a licensed real estate professional for guidance throughout the process.
