The Short Sale Approval Letter: Does Your Client Still Owe?

A client recently received a short sale approval letter from their lender and contacted me to review it. Their main question: Can the bank come back to me at a later date for more money?

Here is what the short sale approval letter stated:
Short Sale Letter

So, is the lender releasing the homeowner from the deficiency? While that may be implied, it is not specifically stated. Yes, the lender is releasing the homeowner from the lien, so they are able to sell the home. And the lender will report the account as paid in full to the credit bureaus. But, nowhere does it state specifically that the lender is releasing the homeowner from all future claims.

My advice was to go back to the lender and verify that there will not only be a release of the lien, but a release of any claims resulting from this loan. Unless the short sale approval letter specifically states that the lender is releasing the homeowner from the deficiency, there is always a chance that they may come back at a later date to collect the balance.

Michele McNeill is a highly respected real estate attorney and a Washington’s Super Lawyers “Rising Star” who specializes in short sales and foreclosures. She routinely receives a 5-star rating from current and past clients.

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