I have answered this question a multiple times on this site between my short sale FAQs and countless blogs (see links below) but it is still the #1 question asked about short sales.

YES, a short sale contract IS a binding contract once buyer and seller agree to terms and both sign off.  The home is still owned by the homeowner, the homeowner can and will sign the contract if it meets the desired terms.  The bank does NOT need to sign the contract to make it binding.

It is very important to understand that the National Association of Realtors states that a short sale contract is no different than any other real estate contract.  A short sale contract is written contingent upon 3^rd party final approval and that contingency carries the same amount of weight as a financing, appraisal or inspection contingency.  During the term of the contract the seller and listing agent will work with lender to procure short sale approval.

REALTORS® received guidance today from the Internal Revenue Service on what constitutes a “binding” contract by May 1, 2010 for home buyers to be able to take advantage of the federal tax credit.

The IRS stated:  “A binding contract is a contract that is enforceable under state law.  A contract may be enforceable under state law even if it contains certain contingencies, such as for home inspection, financing, appraisal, and short-sale lender approval.  Taxpayers who enter into a binding contract to purchase a home before May 1, 2010, and close on the contract before July 1, 2010, can take the credit if they qualify as a first-time homebuyer or long-time resident of the same main home.”

For all the short sale info you could ever want read:

Buying a Short Sale FAQ

Selling a Short Sale FAQ

Six Steps to a Short Sale

Questions you should ask before submitting an offer on a short sale

As well as many of my short sale Blogs

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This entry was posted on Friday, April 30th, 2010 at 10:22 am and is filed under Short Sales. You can follow any responses to this entry through the RSS 2.0 feed.