Short Sale Addendum {SSA38}

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 The printed portions of this form, except differentiated additions, have been approved by the Colorado Real Estate Commission. (SSA38-10-11) (Mandatory 1-12) THIS FORM HAS IMPORTANT LEGAL CONSEQUENCES AND THE PARTIES SHOULD CONSULT LEGAL AND TAX OR OTHER COUNSEL BEFORE SIGNING. SHORT SALE ADDENDUM (Contract to Buy and Sell Real Estate) Date: 1. ADDENDUM TO CONTRACT. This Short Sale Addendum (Addendum) is made a part of the Contract to Buy and Sell Real Estate between Seller and Buyer (Contract) dated _______________________ relating to the sale of the Property known as Street Address City State Zip (Property). This Addendum shall control in the event of any conflict with the Contract. Except as modified, all other terms and provisions of the Contract shall remain the same. PURPOSE AND DEFINITIONS. 2.1. Purpose of Addendum. Seller has debts secured by one or more liens on the Property. The Purchase Price may not be enough to cover payment for all the liens and costs of sale. If so, for the Closing to occur, the affected Lien Holders (§ 2.2 below) must agree to a Short Sale (§ 2.3 below). 2.2. Lien; Lien Holder. A Lien is a recorded claim or lien against the Property, including, but not limited to, a mortgage, deed of trust, mechanic's lien, judgment or tax lien (Lien). A title insurance commitment may be used to show the Liens against the Property. A Lien Holder is a creditor who has a Lien and agrees to release its Lien in a Short Sale (§ 2.3 below). 2.3. Short Sale. A Short Sale (Short Sale) is a transaction in which any Lien Holder releases its Lien against the Property and (1) accepts an amount less than the full amount Lien Holder claims is owed or (2) treats the debt secured by the Lien differently than as originally provided for in the evidence of debt (such as promissory note). Before a Short Sale can occur, Buyer, Seller, and each Lien Holder (except those creditors that are to be paid the full amount claimed) must consent to the terms of the sale. Sometimes, a Lien is released but the Lien Holder does not agree to release Seller from liability or reduce the unpaid portion of the debt, and the Seller and any guarantors will remain liable after Closing for that unpaid portion, despite the release of the Lien against the Property at Closing. 2.4. Short Sale Acceptance. Short Sale Acceptance (Short Sale Acceptance or SSA) is when Seller receives one or more written statements, signed or approved by each Lien Holder, that specify the terms and conditions of the Short Sale. 3. MANDATORY DISCLOSURES TO SELLER AND BUYER. 3.1. Lien Holder is not required to agree to a Short Sale. Even if a Lien Holder agrees to a Short Sale, a Lien Holder is not required to forgive repayment of the debt secured by the Lien or release Seller and any guarantors from liability unless Lien Holder's claim is paid in full. Seller acknowledges that Lien Holder may or may not agree to release Seller or any guarantors from liability to Lien Holder. If not released, Seller and any guarantors will remain liable to Lien Holder for any amount that remains unpaid after the Short Sale. To be binding, any release of liability by Lien Holder must be in writing, must be executed by Lien Holder, and must provide that Seller and all guarantors are released from liability. 3.2. Lien Holder may condition its agreement on Seller doing any or all of the following to obtain a Short Sale Acceptance: (1) make a cash payment, (2) sign a new promissory note, (3) continue to owe the Lien Holder the unpaid portion of the debt and (4) agree to other requirements made by Lien Holder. 3.3. If the Lien Holder accepts less than full payment, Seller understands that Seller may incur federal and state tax liability due to a Short Sale and understands that Lien Holder is required to file all required 1099 Forms with the Internal Revenue Service with respect to this transaction. Seller is strongly advised to seek tax advice regarding the potential adverse tax consequences to Seller of a Short Sale. 3.4. Seller acknowledges that a Short Sale Acceptance by the Lien Holder will not necessarily repair or rehabilitate Seller's credit rating and Lien Holder has no obligation other than to fairly report this transaction to any credit rating agency. 3.5. Release of the Lien against the Property does not by itself release Seller or any guarantors from liability for the debt. 3.6. Buyer acknowledges that the Short Sale Conditions (§ 4 below) may lead to termination of the Contract. The Short Sale process may result in delays in the Closing. Buyer is advised to consult with legal counsel about this Addendum and its legal effect. 2. SSA38-10-11. SHORT SALE ADDENDUM (Contract to Buy and Sell Real Estate) Page 1 of 3 American LegalNet, Inc. www.FormsWorkFlow.com 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 3.7. Buyer and Seller acknowledge and agree that any Short Sale Acceptance by Lien Holder is made on the condition that none of the terms of the sale shall differ in any material respect from the terms submitted to the Lien Holder on which the Short Sale Acceptance was based. For purposes of the Contract, any change in the date of Closing, Purchase Price, real estate brokerage commissions, concessions or net proceeds to be paid to, or other remuneration to be received by Seller in connection with the proposed Short Sale shall be deemed a material change. Any material change will require that the Short Sale proposal be re-submitted to the Lien Holder for approval, which could result in delays for approval or even denial of the Short Sale. 3.8. This Addendum should be signed by both Buyer and Seller at time of contracting, as most Lien Holders will not consider a Short Sale until a signed contract is received for their review. 4. SHORT SALE CONDITIONS. Notwithstanding anything to the contrary in this Addendum, the Contract between Seller and Buyer, for the benefit of both Seller and Buyer, is conditional upon all of the following occurring: 4.1. Seller has received from each Lien Holder a Short Sale Acceptance that is acceptable to Seller. 4.2. Agreement to Amend/Extend Contract signed by Buyer and Seller, so long as both parties agree, in their sole subjective discretion, to the changes to the Contract required by the Short Sale Acceptance. 5. SELLER DEADLINE FOR SUBMISSION TO LIEN H