Oregon 30-Hour Real Estate Law Practice Test

Why might buyers require additional cash at closing for a short sale?

1. To cover repairs not included in the sale

2. Buyers may need to pay off existing liens

3. To pay for the buyer's agent commission

4. To cover closing costs associated with moving

The correct answer is: Buyers may need to pay off existing liens

In the context of a short sale, buyers may require additional cash at closing primarily to pay off existing liens on the property. A short sale occurs when a homeowner sells their property for less than the amount owed on the mortgage, with the lender's approval. Often, there can be other liens on the property, such as tax liens or home equity lines of credit, that still need to be satisfied. When a buyer makes an offer on a short sale, they must be aware that these additional obligations might arise, which could necessitate extra cash at closing. While repairs, agent commissions, and moving costs may also incur expenses, they are typically considered separate from the immediate financial obligations related to the property's liens. The approval of the short sale hinges on the lender's acceptance of the sale price, and buyers must be prepared to address these outstanding liens to secure clear title to the property. Thus, having the ability to cover these liens is a critical consideration for buyers navigating a short sale transaction.