Short Sale Addendum Agreement
A Short Sale Addendum Agreement is a legal document that is added to a real estate purchase contract when a property is being sold for less than the amount owed on its mortgage. This situation arises when a homeowner is in financial distress and cannot afford to continue making mortgage payments, leading them to seek a short sale as a way to avoid foreclosure.
The Short Sale Addendum Agreement outlines the specific terms and conditions under which the short sale will be conducted, including:
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Approval from the Lender: The agreement specifies that the sale is contingent upon receiving approval from the lender holding the mortgage, as they must agree to accept less than the full amount owed.
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Sale Price: It establishes the agreed-upon sale price, which will be less than the outstanding mortgage balance.
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Buyer and Seller Obligations: The document delineates the responsibilities of both the buyer and seller throughout the short sale process, including providing necessary documentation to the lender.
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Timeline: It may outline a timeline for when the lender must respond to the short sale request and any deadlines for completing the sale.
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Potential Implications: The agreement typically addresses the tax implications and how any remaining debt after the sale may be treated.
For example, if a homeowner owes $300,000 on their mortgage but the current market value of the home is only $250,000, they may enter into a Short Sale Addendum Agreement with a buyer who is willing to purchase the property for that amount, subject to the lender’s approval. The addendum serves to formalize the arrangement and ensure all parties understand the terms involved in the short sale process.
In conclusion, a Short Sale Addendum Agreement is a crucial document that facilitates a real estate transaction involving a short sale, ensuring that all parties are aligned on the terms and procedures necessary to complete the sale while addressing the lender’s requirement for approval.
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