Both Buyer and Seller Must Understand and Agree To The Short Sale Addendum:
LEGAL & TAX ADVICE: Seller acknowledges that Broker is not qualified to provide financial, legal, or tax advice regarding a short sale transaction. Therefore, the Seller is advised to obtain professional tax advice and consult independent legal counsel immediately regarding the tax implications and advisability of entering into a short sale agreement.
CREDIT AND CREDITOR CONSIDERATIONS: A short sale may adversely affect the Seller’s credit score. Further, even if the creditor(s) agrees to a short sale, the creditor(s) may not agree to forgive the debt entirely, and may require the Seller to pay the difference as a personal obligation. If the loan is guaranteed by the FHA or VA, these entities may also require payment of the difference. Seller is advised to be certain of the terms of any short sale before making a decision, and obtain any debt forgiveness agreement in writing.
TAX CONSIDERATIONS: A short sale in which a portion of the debt is forgiven is considered a relief of debt and may be treated as income for tax purposes. A creditor who forgives a debt may submit a 1099 form to the IRS indicating the amount of the debt that has been forgiven.
DETERMINING THE AMOUNT OWED: Seller agrees to disclose all liens encumbering the Premises and to cooperate with Broker(s), escrow company, and creditor(s) to determine the amount of debt owed on the property, including but not limited to, purchase money loans, home equity loans, homeowner’s association fees, property taxes and other tax liens.
OBTAINING CREDITOR APPROVAL: Obtaining creditor(s) approval of a short sale involves documentation similar to that required for the original loan application. The Seller must generally establish that the Seller is financially incapable of paying the loan(s). The Seller agrees to promptly submit to creditor(s) all requested documentation, including W-2 forms from employers, bank statements, tax returns, “hardship letter” (stating the reason the creditor(s) should consider granting a short sale) and other requested financial documents outlining income and debt. The Seller acknowledges that it may take weeks or months to obtain creditor(s) approval of a short sale. Seller(s) agrees to grant creditor(s) permission to communicate directly with Broker(s).
OTHER OPTIONS: Seller is advised to explore options with creditors other than a short sale, such as loan modification, revised repayment plan, refinance or entry into a lender(s) loan mitigation program, if available. Seller agrees to notify Broker if Seller decides to pursue other options.
CONTINGENT UPON ACCEPTABLE SHORT SALE AGREEMENT: Buyer and Seller acknowledge that there is more debt owing against the Premises than the purchase price. Therefore, this Contract is contingent upon an agreement between the Seller and Seller’s creditor(s), acceptable to both, to sell the Premises for less than the loan amount(s) (“short sale”). Buyer and Seller acknowledge that it may take weeks or months to obtain creditor(s) approval of a short sale. Nothing shall limit a Seller from accepting subsequent offers from subsequent buyer(s) and submitting the back-up contract(s) to Seller’s creditor(s) for consideration. All parties understand and agree that Seller’s creditor(s) may elect to allow the Seller to sell the Premises only to the holder of the Contract with terms and conditions most acceptable to creditor(s).
DOCUMENTATION TO CREDITOR(S): Seller shall submit to creditor(s) a copy of this Contract, including this and other Addenda, and any other documentation required by the creditor(s) for approval of this sale within five (5) days after Contract acceptance. Seller agrees to diligently work to obtain short sale approval and will promptly provide the creditor(s) with all additional documentation required, including an appraisal, at Seller’s expense, if required. Seller instructs creditor(s) to provide approval status updates to Broker(s) and Buyer upon request.
TERMS UPON ACCEPTABLE SHORT SALE AGREEMENT:
- Agreement Notice: If Seller and Seller’s creditors enter into a short sale agreement, the Seller shall immediately deliver notice to Buyer (“Agreement Notice”).
- Time Periods: The date of Seller’s delivery of the Short Sale Agreement Notice to Buyer shall be deemed the date of Contract acceptance for purposes of all applicable Contract time periods.
- Escrow and Earnest Money: Buyer shall promptly open Escrow and deposit Earnest Money as described in the Contract upon receipt of Agreement Notice.
- Loan Costs: Buyer will be responsible for all Buyers’ Loan Costs.
- Seller Warranties: Buyer hereby waives Seller’s warranties as set forth in Lines 163-166 of Section 5a of the Contract that all listed items shall be in working condition at the earlier of possession or COE. However, Seller warrants and shall maintain and repair the Premises so that, pursuant to lines 167-168 of the Contract, at the earlier of possession or COE, the Premises, including all heating, cooling, mechanical, plumbing, and electrical systems (including swimming pool and/or spa, motors, filter systems, cleaning systems, and heaters, if any), free-standing range/oven, built-in appliances and additional existing personal property included in the sale, will be in substantially the same condition as on the date of Contract acceptance and all personal property not included in the sale and all debris will be removed from the Premises.
- Close of Escrow: Close of Escrow shall occur thirty (30) days or _________________ days after delivery of Agreement Notice.
- Creditor Requirements: Buyer and Seller agree to cooperate with Creditor(s) and sign additional Creditor disclosure(s) or execute additional addendum(a) required by Creditor(s) as a condition of approval of the short sale, provided that Buyer and Seller incur no additional cost or liability.
BUYER CANCELLATION: Buyer may unilaterally cancel this Contract by notice to Seller at any time before receipt of a short sale Agreement Notice from Seller.
UNFULLFILLED CONTINGENCY: In the event that Seller and Seller’s creditor(s) are unable to reach a short sale agreement acceptable to both, at the sales price contained herein, Seller shall promptly notify Buyer of same, and the Contract shall be deemed cancelled due to the unfulfilled short sale contingency. If applicable, Buyer shall be entitled to a return of any Earnest Money.
