Which document is required to finalize a sale for less than the amount owed on a mortgage?

Which document is required to finalize a sale for less than the amount owed on a mortgage?

• A. Purchase agreement
• B. Affidavit of Affixture
• C. Short sale approval from the lender
• D. Closing disclosure

Answer: (C)

To finalize a sale for less than the amount owed on a mortgage, it is necessary to obtain short sale approval from the lender. This process is critical when the home is being sold for less than the outstanding mortgage balance, often referred to as a "short sale." The lender must agree to accept the proceeds of the sale as full payment of the loan, which means they will forgive the remaining debt that the seller owes. The lender typically requires a comprehensive review of the seller's financial situation to determine eligibility for the short sale. This includes documentation such as a hardship letter, financial statements, and potentially a valuation of the property. Without this approval, the sale cannot be legally finalized because the lender still has a claim to the remaining balance of the mortgage. While a purchase agreement is essential in any real estate transaction and a closing disclosure provides details on the financial aspects of the closing, they do not address the specific requirement regarding the lender's consent in a short sale situation. The affidavit of affixture is relevant in specific cases involving personal property converted to real property, which does not pertain to mortgage debt settlements. Therefore, the short sale approval from the lender is the essential document needed to complete the sale under these circumstances.

To finalize a sale for less than the amount owed on a mortgage, it is necessary to obtain short sale approval from the lender. This process is critical when the home is being sold for less than the outstanding mortgage balance, often referred to as a "short sale." The lender must agree to accept the proceeds of the sale as full payment of the loan, which means they will forgive the remaining debt that the seller owes.

The lender typically requires a comprehensive review of the seller's financial situation to determine eligibility for the short sale. This includes documentation such as a hardship letter, financial statements, and potentially a valuation of the property. Without this approval, the sale cannot be legally finalized because the lender still has a claim to the remaining balance of the mortgage.

While a purchase agreement is essential in any real estate transaction and a closing disclosure provides details on the financial aspects of the closing, they do not address the specific requirement regarding the lender's consent in a short sale situation. The affidavit of affixture is relevant in specific cases involving personal property converted to real property, which does not pertain to mortgage debt settlements. Therefore, the short sale approval from the lender is the essential document needed to complete the sale under these circumstances.