What is a necessary reason for buyers to have additional cash at closing for a short sale?

In the context of a short sale, it is essential for buyers to understand that the process involves the seller negotiating with their lender to accept a lower amount than what is owed on the mortgage. One necessary reason for buyers to have additional cash at closing in this scenario is that short sales typically do not clear all liens from the title.

When a property is sold in a short sale, while the primary mortgage is addressed, there may still be other liens on the property, such as second mortgages, homeowner association fees, or tax liens. These liens must be resolved before the transfer of ownership, and often, the buyer is responsible for covering these costs. This means that even after the bank approves the sale amount, buyers may need to come up with extra cash at closing to ensure that these additional obligations are satisfied.

Having additional funds allows the buyer to handle these expenses properly, ensuring a smooth transaction and transfer of the property title without any lingering financial encumbrances that could complicate their ownership later on.