New Issues with Short Sales of Property in Foreclosure

IF YOU OR YOUR CLIENT(S) ARE IN FORECLOSURE AND HAVE SOLD OR ARE ATTEMPTING TO SHORT SALE YOUR PROPERTY: When property is sold in a short sale, the bank is required to release the mortgage and dismiss any foreclosure action it has filed against the property. It has come to our attention that some foreclosure law firms that represent banks are now requesting sellers to execute a release and/or waiver of any legal claims and/or defenses as a precondition to dismissing the seller’s foreclosure action after a short sale has been completed. Depending on the nature of the short sale approval that was obtained from the lender and the anticipated treatment of the deficiency, this could have extremely adverse consequences for a short sale seller who is also involved in a foreclosure.

We believe that this may not be legally permissible. If you hear of this practice, we encourage you to suggest to your clients that they consult with an attorney. If Berlin Patten handled the closing, we will assist in providing legal guidance as part of our basic closing service. If a non-attorney closing/title agent handled the closing, then the Seller is strongly advised to seek the advice of their attorney before executing such a document.

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