Protecting the Short Sale Seller in the Purchase Agreement
ByDarren Welsh, corporate attorney for Prudential Americana Group Realtors, recently posted on his Nevada Residential Real Property Law blog advice on the specific language regarding release and full satisfaction of the forgiven debt in a short sale. The Serra Group is experienced in the listing and successful closing of short sales. We strive to negotiate a full release and forgiveness of debt on your behalf and advise consulting with a qualified attorney if necessary. We also structure the purchase agreement in such away that you will have the opportunity to weigh your options and should a full release and satisfaction not be possible, to allow you to cancel the sale without further recourse from the buyer.
Here is a re-posting of Attorney Welsh’s blog regarding release language in a short sale:
Advise the seller to seek legal counsel. Nevada is a deficiency judgment state, which means a seller can be sued after they have been foreclosed upon. A second can pursue a foreclosed owner for six years. By performing a short sale, instead of foreclosure, the one-action rule and the deficiency protections are no longer applicable. The Seller in a short sale will have a tax consequence. Sellers in a short sale may also be sued by the lender for breach of non payment of a contractual obligation. The statute of limitations in Nevada for breach of contract is six (6) years.
The following are some examples of language used by the lenders to deal with debt. Some are good, some not so good, some BAD.
Example 1 – Not GOOD
In this one, the lender states, “may pursue a deficiency…” The seller may be sued for up to six (6) years.
BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment received and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above. In addition, if this loan is covered by mortgage insurance, the mortgage insurance company may reserve the right to pursue the seller for the deiciency based on the terms of the mortgage insurance policy.
Example 2 – GOOD
In this one, the lender states, “settle your account…”
This letter is to inform you that Chase Home Finance LLC has agreed to your request for a Short Sale, and will accept a minimum of $$$$$ to settle your account and release the lien(s) on the above-referenced Property.
Example 3 – GOOD
In this one, the lender states, “will be charged off and no additional payment will be required…”
Our Customer(s) agrees that upon the posting of the agreed upon Short Sale amount, the remaining loan balance, if any, will be charged off and no additional payment will be required. Please note a $0.00 balance will appear on the Customer’s file with the credit bureau as “Account legally paid in full for less than the full balance.”
Example 4 – GOOD
In this one, the lender states, “full and final satisfaction on the first mortgage …”
This letter will confirm our acceptance of the short payoff on the above referenced property. We agree to accept the proceeds generated by the $$$$ “as is condition” purchase as full and final satisfaction on the first mortgage indebtedness on the above referenced property.
Are you a Las Vegas Homeowner facing a possible foreclosure or considering a short sale?
Related posts:
Here http://foreclosurenv.wordpress.com/2009/12/18/why-short-sales-will-end-the-las-vegas-real-estate-crises-in-2010/ is an interesting article on how waiving deficiency judgments in short sales reduces principals and will positivley affect the Las Vegas Real Estate Market in 2010.