Thomas is a licensed New Jersey salesperson who receives a call from a homeowner in foreclosure asking for help selling the property before the sheriff's sale. Thomas knows the sale price will be less than the mortgage balance. Which term describes this type of transaction, and what must Thomas understand about it?
Correct Answer
A) A short sale; the lender must agree to accept less than the full mortgage payoff and release the lien before closing can occur
A short sale occurs when the property is sold for less than the outstanding mortgage balance and the lender agrees to accept the reduced proceeds as full or partial satisfaction of the debt. In New Jersey, as in all states, the lender's written approval (a short sale approval letter) is required before closing because the lender must agree to release its lien for less than the full amount owed. Thomas must help the homeowner submit a complete short sale package to the lender and should advise the homeowner to consult an attorney about potential tax consequences and whether the lender will waive the deficiency.
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Related Topics & Key Terms
Key Terms:
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