As most buyers and sellers understand these days, the short sale process is much more complicated (and lengthy) than a traditional real estate transaction. There are a number of decisions along the way that can help move along smoothly or help a deal fall apart. I am putting together a series of blog posts about the common mistakes that I see, and advice on how to avoid them.
Mistake #2: Assuming that the short sale approval means you don’t have to pay anything back to your lender.
The goal is to always negotiate a short sale with a borrowers lender for “satisfaction of seller’s debt”…meaning that the seller is not on the hook for the difference between the accepted sales price and what they owe.
However, this is not always a given. The short sale approval letter needs to explicitly state that the lender is agreeing to waive all rights to the deficiency. Make sure and clarify any language with your real estate agent (or negotiator) before you sign anything. You want a “full debt satisfaction” and not just a “lien release” which obligates you to pay back a portion of the debt owed.