The lienholder(s) have approved your short sale. You’re the seller.
Escrow is due to close next week. At your signing appointment at the title company, there’s a big surprise: the lienholder(s) want you to sign a promissory note.
“No way!” you say. Deal’s off. Buyers not happy. Six months of work down the tubes.
It’s not uncommon for the seller’s lender(s) to require a signed promissory note – usually for the loan balance – as a condition of releasing the lien(s) in a short sale. (Word on the street is that Bank of America automatically requires them.) The terms of the note could be “generous,” like no interest over a long payment period. Still, sellers usually refuse them and would rather let the property foreclose.
So, if in a short sale, ask the bank(s) upfront if this will be an issue. The loss mitigation department may not give a straight answer; they might simply refer you to the verbiage on the short sale approval letter, if you even get that far. That’s exactly what a contact at ING did. Here’s a snippet from their approval letter:
Consult an attorney. Is “in full satisfaction” good enough…or open to scumbag interpretation?
And here’s a slice from a final addendum Wells Fargo (the second lienholder in this particular case) provided right at closing. The Wells loss mitigation contact did say, when asked after short sale approval, that they wouldn’t pursue a soft note or any sort of deficiency judgment.
