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Are non arms length short sales legal in Washington State

Asked over 2 years ago - Seattle, WA

I have a client who wants to purchase a short sale from her sister (of a different last name). Is this legal or not ? The owner of note is a big corporate bank. One rep from the loss mitigation dept. said:

1) they will not accept non-arms length short sales

while another rep of the same bank said..

2) they might, depending on the circumstances

I'm stumped

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Attorney answers (1)

David A. Leen

Reputation Level 10

Answered over 2 years ago. Real Estate Attorney in Seattle, WA.

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The lender can impose any limits on whether or not to accept a short sale. Generally they want the sale to be arms length to ensure that there is no collusion in the transaction. It is a policy, not a law. I recommend to explain the true situation rather than risk a claim of misrepresentation after the fact.

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