Escrow & Title
A Massachusetts closing attorney discovers that the seller's existing mortgage payoff amount exceeds the sale price. The parties are facing a:
AConventional sale
BShort sale requiring lender approval✓ Correct
C1031 exchange
DDeficiency judgment situation only
Explanation
When the mortgage balance exceeds the sale price, the seller cannot satisfy the mortgage from the proceeds. A short sale requires the lender's approval to accept less than full payoff.
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Key Terms to Know
Short Sale
A sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
1031 ExchangeA tax-deferred exchange allowing investors to sell one investment property and reinvest proceeds in a like-kind property while deferring capital gains taxes.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Math Concepts
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