There is a new Short Sale Addendum for purchase agreements. This form which serves to better define the terms of the Short Sale has some new additions and removed some items.
This is a great tool for short sales.
Here are the changes…
Section 1 – now has this language, “Seller understands and acknowledges that lender approval may be conditioned upon any or all of the following: (a) making a cash payment; (b) signing a new promissory note; (c) continuing to owe the lender the unpaid portion of the loan(s); and (d) other requirements made by lender.”
WHAT IT MEANS – Short sales, unlike any other normal sale can result in the Seller having legal liability in years to come. This can come in the form of collections or even law suits. This section serves to better warn the Seller. See my blog on Seller Liability After Short Sale
Section 2 – the Lender Short Sale Approval Addendum has been incorporated into the Addendum.
WHAT IT MEANS – See my explanation of the Lender Short Sale Approval Addendum form by clicking here.
Section 3 – now has the language, “either Party may, in its sole discretion, reject the amended terms required by Lender.”
WHAT IT MEANS – If the Lender changes the terms, for example refuses to pay closing costs from proceeds, any party may cancel.
Section 4 – Time Frames, due diligence commencement has been changed to “(1) calendar day after the Parties’ mutual written approval of the Lender Approval”
WHAT IT MEANS – Due diligence commences upon the Parties agreeing to the terms of the Lender. This is tricky. If there was no change by the Lender, then this should be when the listing agent informs the selling agent of Lender approval. If the Lender changes the terms and the Lender Short Sale Approval Addendum is used, then the due diligence commencement is the date of the final signature of the Parties, not the date it was served upon the selling agent.
Section 6 – The first right of refusal has been REMOVED! All subsequent offers are now “back up offers.”
Section 9 – Legal and Tax Consequences has added, “A Short Sale May Have Serious And Adverse Legal, Tax, Credit And Economic Consequences For The Seller. Seller agrees to seek advice from an attorney, a certified public accountant or other qualified professional regarding the legal effect and meaning of a short sale and any Lender Approval.”
WHAT IT MEANS – Short sales, unlike any other normal sale can result in the Seller having legal liability in years to come. This can come in the form of collections or even law suits. This section serves to better warn the Seller. See my blog on Seller Liability After Short Sale
This is part of my short sale series listed below in alphabetical order:
Addendum to Short Sale Listing
Charging for negotiating short sales/Negotiators
Foreclosure and the One Action Rule in Nevada
HAMP the Federal Shortsale Program coming April 2010
Income Taxes & Foreclosures/Shortsales
Lender Short Sale Approval Addendum
Nevada Supreme Court Mandatory Mediation Program and How it Affects Shortsale
Seller Being Released From Liability Language in Shortsale
Seller Liability After Short Sale
Shortsale Wallet Size Answer Sheet
IRS PUBLICATIONS shortsales/foreclosures:
IRS publication on how 1099 taxes are calculated, exempt, etc.
IRS explanation as to taxes resulting from Foreclosure and Debt Cancellation.
Questions? Call me Darren Welsh, Esq. 702 245 1787 or drop me a TPS by filling out this form.
October 8, 2010 at 11:22 am
Shouldn’t the language advising the seller what s/he might need to contribute be presented at the time the listing is taken (IOW in the short sale addendum to listing agreement) rather than at the time that a buyer becomes interested in the property?
October 8, 2010 at 12:48 pm
It should. I am changing the listing addednum form in the next 90 days. Thank you for the input. The warning language will be identical in both documents.
December 3, 2010 at 3:44 pm
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