Banktown Foreclosures

From the North Carolina Real Estate Commission: 

QUESTION: I represent a seller who is involved in a possible short sale.  I have received an offer on the Offer to Purchase and Contract (form 2-T) with an attached Short Sale Addendum (form 2A14-T).  A check for the earnest money provided for in paragraph 4(a) was submitted with the Offer.  If my seller client accepts the offer, does it become a legally-binding contract then or only later if and when the lender (hopefully) approves the short sale?  I need to know when I am supposed to put the earnest money deposit into my firm’s trust account.

ANSWER: The offer will become a binding contract at such time as your seller client signs the offer and that fact is communicated to the buyer or the buyer’s agent.  See the introductory paragraph in the Offer to Purchase and Contract.  The fact that the sale will require approval from the seller’s lender doesn’t mean that the contract isn’t binding. If your seller accepts the offer, you should deposit the earnest money deposit into your trust account no later than three banking days following the acceptance.

The hit to your credit from a short sale is considerably less, and for a shorter period of time than if a bank forecloses on your property.

Banks may also seek what is known as a "Deficiency Judgement" against you if they foreclose.  Typically in a short-sale negotiations this is waived by the lender on behalf of the property owner.  A Deficiency Judgement is:

"An unsecured money judgment against a borrower whose mortgage foreclosure sale did not produce sufficient funds to pay the underlying promissory note, or loan, in full."