Lisa is a licensed Utah real estate sales agent helping her client purchase a home in Sandy. The seller is in default on his trust deed loan and the property is being sold as a short sale, meaning the lender will accept less than the full amount owed. The lender agrees to accept $310,000 as full satisfaction of a $350,000 loan balance. Lisa's client wants to know if the seller could be held responsible for the $40,000 difference after the short sale closes. What should Lisa tell her client?
Correct Answer
B) Whether the seller is released from the $40,000 depends entirely on the terms of the lender's written short sale approval letter
In a short sale, the lender's written approval letter governs whether the seller is released from the deficiency. If the lender's approval letter states the short sale proceeds are accepted as 'full satisfaction' of the debt, the seller is released from the $40,000 deficiency. If the letter is silent or reserves the right to pursue the deficiency, the lender may still seek a deficiency judgment. Lisa should advise her client that the seller's liability depends entirely on the specific language in the lender's written approval. This is a negotiated contractual matter, not an automatic legal protection under Utah law.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
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