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Short Sale Addendum to Purchase Agreement

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SHORT SALE ADDENDUM TO PURCHASE AGREEMENT

1. ADDENDUM TO CONTRACT. This Short Sale Addendum (Addendum) is attached to and made a part of the purchase agreement (Purchase Agreement) between

(Buyer)

(Seller) dated , 20____ for the purchase and sale of the property known as

(Property).

This Addendum shall control in the event of any conflict with Purchase Agreement. Except as modified, all other terms and provisions of Purchase Agreement shall remain the same.

2. Purpose of Addendum. Seller has debts secured by one or more liens on Property. The purchase price may not be enough to cover payment for all the liens and costs of sale. If so, for the closing to occur, the affected lienholder (§ 2.1 below) must agree to a short sale (§ 2.2 below).

2.1. Lien; Lienholder. A lien is a recorded claim or lien against Property, including, but not limited to, a mortgage, deed of trust, mechanic’s lien, judgment or tax lien (Lien). A title insurance commitment may be used to show any Lien against Property. A lienholder (Lienholder) is a creditor who has a Lien and agrees to release the Lien in a short sale (§ 2.2 below).

2.2. Short Sale. A short sale (Short Sale) is a transaction in which a Lienholder releases its Lien against Property and (1) accepts an amount less than the full amount a Lienholder claims is owed or (2) treats the debt secured by a Lien differently than as originally provided for in the evidence of debt (such as a promissory note).

Before a Short Sale can occur, Buyer, Seller, and Lienholder (except those creditors that are to be paid the full amount claimed) must consent to the terms of the sale. Sometimes, Lien is released but Lienholder does not agree to release Seller from liability or reduce the unpaid portion of the debt, and Seller and any guarantors will remain liable after closing for that unpaid portion, despite the release of Lien against Property at closing.

2.3. Short Sale Acceptance. Short Sale Acceptance is when Seller receives one or more written statements, signed by Lienholder, that specify the terms and conditions of Short Sale.

3. SHORT SALE APPROVAL. This Addendum is contingent upon Seller’s receipt of written consent from all existing Lienholders, no later than 90 days after acceptance of Purchase Agreement which falls on (Short Sale Acceptance Date), to reduce their respective loan balances by an amount sufficient to permit the proceeds from the sale of the Property to pay the existing balances on loans secured by the Property, real property taxes, brokerage commissions and applicable sales tax, closing costs, and other monetary obligations the Purchase Agreement and Listing Agreement require Seller to pay at closing (including, but not limited to, escrow charges, title charges, documentary transfer taxes, prorations, retrofit costs and repairs) without requiring Seller to place any funds into escrow.

If Seller fails to give Buyer written notice of all existing consents from all Lienholders by the Short Sale Acceptance date, either Seller or Buyer may cancel, in writing, the Purchase Agreement. In that event, earnest money will be disbursed in accordance with SDCL 36-21A-81. Seller shall reasonably cooperate with any existing Lienholder during the Short Sale process. Seller must notify Buyer immediately upon receipt of a Lienholder’s consent and agreement to Short Sale.

4. SELLER DEADLINE FOR SUBMISSION TO LIENHOLDER. Within five (5) business days after this Addendum has been accepted by Buyer and Seller, Seller shall submit to each Lienholder a copy of this Addendum and other Addenda and documentation required by a Lienholder for its approval of this sale.

Any additional information or documentation requested of Seller by such Lienholder shall be submitted within five (5) business days of such request or Buyer may terminate Purchase Agreement in accordance with the terms of Purchase Agreement.

Buyer and Seller acknowledge that an agreement to amend/extend Purchase Agreement is required to revise any dates, deadlines or terms of Purchase Agreement as a result of changes required by Lienholder’s acceptance of Short Sale.

Buyer and Seller understand that the approval of a Lienholder may take weeks or months to obtain, and neither the Seller nor any real estate agent representing Seller or Buyer can guarantee the timeliness of Lienholder approval.

5. TIME PERIODS - CONTINGENCIES. Time periods in the Purchase Agreement for inspections, contingencies, covenants, and other obligations shall begin:

A. as specified in the Agreement;

B. the day after Seller delivers to Buyer a written notice of Lienholder’s consent, or;

C. other

6. NO ASSURANCE OF LENDER APPROVAL. Buyer and Seller understand that a Lienholder (a) is not obligated to accept transaction as a Short Sale; (b) may require Seller to forward any other offer received; and (c) may accept other Short Sale offers. Additionally, Lienholder may require that, in order to obtain its approval for a Short Sale, some terms of the Purchase Agreement such as the closing, be amended or that Seller sign a personal note or some other obligation for all or a portion of the amount of the secured debt reduction. Buyer and Seller do not have to agree to any of the terms proposed by a Lienholder. Buyer, Seller and real estate brokers do not have control of whether a Lienholder will consent to a Short Sale, or any act, omission, or decision by any Lienholder in the Short Sale process. Even if Lienholder agrees to a Short Sale, Lienholder is not required to forgive repayment of the debt secured by the Lien or release Seller and any guarantors from liability unless Lienholder’s claim is paid in full.

Lienholder may condition its agreement of Short Sale on Seller doing any or any combination of the following to obtain Short Sale Acceptance:

A. making a cash payment;

B. signing a new promissory note;

C. continuing to owe a Lienholder the unpaid portion of the debt; or,

D. agreeing to other requirements made by Lienholder.

7. OFFERS FROM OTHER BUYERS. Seller may keep Property on the market and continue to show it to other buyers. Buyer and Seller understand that additional offers may be received by Seller’s agent, which must be presented to Seller pursuant to South Dakota law. Such offers may be accepted by Seller as backup contracts.

8. BUYER AND SELLER COSTS. Buyer and Seller acknowledge that each may incur costs in connection with rights or obligations under the Purchase Agreement. These costs may include, but are not limited to, payments for loan applications, inspections, appraisals, and other reports. Such costs will be the sole responsibility of the party incurring them if any Lienholder does not consent to the Short Sale transaction.

9. FORECLOSURE. Seller represents that to the best of Seller’s knowledge, a foreclosure proceeding has not has been filed with respect to the Property. Further, if during the Short Sale process a foreclosure proceeding is filed, Seller shall disclose such foreclosure filing to Buyer. Buyer and Seller understand that if the closing does not occur before the end of the 180-day redemption period of the Property, Seller will lose all rights and interest in the Property. In such event, Purchase Agreement shall be void, and all earnest money shall be disbursed pursuant to SDCL 36-21A-81.

10. CLOSING. Closing shall occur within thirty (30) days or days after delivery of Lienholder approval.

By signing below, Buyer and Seller acknowledge that they have read, understand, accept and received a copy of this Short Sale Addendum.

Date

Buyer

Buyer

Date

Seller

Seller

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What the Short Sale Addendum to Purchase Agreement Is

Short Sale Addendum to Purchase Agreement is a real estate contract addendum used when the seller owes more on the mortgage than the proposed sale price and lender approval is required for a short payoff. The addendum records lender-approval contingencies, timelines for submission and response, instructions for handling earnest money if the lender declines, and authorization to negotiate with lienholders. It supplements the main purchase agreement to protect buyer and seller expectations during lender review and to clarify who pays costs, how closing proceeds if approval is granted, and remedies if the lender refuses the short sale.

Why a Short Sale Addendum Matters in Real Estate Deals

A clear addendum reduces ambiguity when closing depends on lender consent: it allocates risk, sets deadlines, and preserves deposit handling rules if the lender delays or denies approval, helping parties avoid disputes and unexpected financial exposure.

Why a Short Sale Addendum Matters in Real Estate Deals

Who Typically Uses This Addendum

Real estate agents, buyers, sellers, listing brokers, and lender loss-mitigation teams use the Short Sale Addendum when a sale requires lender short-pay approval.

  • Listing agents and brokers — prepare and attach the short-sale package and communicate lender timelines to all parties.
  • Buyers and buyer agents — confirm contingency dates and deposit protection terms before removing contingencies.
  • Sellers and loss-mitigation representatives — provide authorization to negotiate and disclose mortgage payoff details.

Use the addendum whenever a purchase is conditional on a lender agreeing to accept less than the mortgage balance.

Who Can Sign and Why It Matters

Seller (Authorized Signer)

The seller or an authorized signatory for the seller (trustee, corporate officer, or power-of-attorney holder) must sign to bind the seller to lender negotiation and contingency terms; mismatched authority can invalidate the addendum.

Lender Representative

A designated loss-mitigation officer or authorized servicer representative signs lender acknowledgments when the lender accepts the short payoff; lender signature or written acceptance is typically required before closing.

Essential Elements to Include in a Professional Short Sale Addendum

A complete addendum explicitly states the lender-dependent conditions, deadlines, deposit handling, and obligations so all parties understand the pathway to closing or termination.

Lender Approval Clause

Specify that the sale is contingent on lender written approval of the short payoff, define what constitutes approval, and state whether partial approvals or counteroffers are acceptable and how they affect the contract.

Authorization to Negotiate

Record seller authorization for the listing agent or designated representative to submit payoff figures and negotiate with lienholders; include loan account identifiers and required documentation scope.

Contingency Deadlines

Set clear dates for submission of the short-sale package, lender response windows, and buyer decision points (inspection removal, financing contingency deadlines) tied to lender action.

Earnest Money Handling

Describe when the buyer’s deposit is refundable, conditions for deposit release or forfeiture, escrow instructions if lender approval is delayed, and any fees the buyer may be charged.

Purchase Price and Credits

State the agreed sale price, any seller concessions or credits, and how lender-approved reductions or counteroffers will modify the buyer’s obligations to proceed.

Closing and Remedies

Outline closing procedures if the lender approves, options if the lender denies approval, and dispute resolution or termination rights for the buyer and seller.

Step-by-Step: How to Complete and Use the Addendum

Complete the addendum in coordination with the listing agent and lender to ensure timelines and documentation align with loss-mitigation requirements.

  • 01
    Draft Addendum: Populate all required fields and attach seller authorization and payoff estimates.
  • 02
    Submit to Lender: Deliver the short-sale package per lender instructions and note the submission date.
  • 03
    Await Lender Response: Track lender communications and document any counteroffers or conditions in writing.
  • 04
    Close or Terminate: Follow the addendum’s closing steps if approved or apply the termination provisions if denied.

How to Customize and Complete the Addendum Online

Set up a consistent e-sign and review workflow to collect signatures, attach lender documents, and maintain an audit trail for auditors and title companies.

Field Configuration
Signature Fields Place signer-specific signature and date fields for seller, buyer, and broker.
File Attachments Require uploads for signed authorization, pay-off statements, and hardship letters.
Authentication Use email verification or SMS code for basic signer identity validation.
Audit Trail Enable full audit logs capturing timestamps, IP addresses, and document history.

Where to Send and Store the Completed Addendum

After completion, route the addendum to all parties and retain copies in escrow and transaction management systems for closing and compliance.

  • Seller and Listing Broker: Provide executed copies to confirm authorization and for seller loss-mitigation records.
  • Lender / Servicer: Submit the signed addendum and supporting short-sale packet to the lender’s loss-mitigation department.
  • Title/Escrow Company: Deliver the addendum to the title or escrow agent so closing can be coordinated if approval is granted.
  • Buyer’s Agent / Buyer: Send a signed copy to the buyer and buyer’s agent so deposit handling and contingency dates are clear.

Digital Signing and eSubmission Best Practices

Use a compliant eSignature platform that supports audit trails, file attachments, and optional multi-factor authentication.

  • File Formats: PDF or Word DOCX
  • Integrations: Title systems and CRM
  • Authenticator: Email, SMS, or advanced options

Common Deadlines and Timing Expectations

Short-sale processes have multiple calendar-driven checkpoints; set realistic windows and obtain written extensions if lender processing runs long.

Short-Sale Submission:

Submit package promptly; many lenders expect 7–30 days for initial review.

Lender Response Window:

Lender response often arrives within 30–90 days, but timelines vary by servicer.

Buyer Contingency Removal:

Do not remove financing or inspection contingencies until written lender approval is secured.

Closing Date:

Set tentative closing subject to lender approval with extension provisions.

Deposit Release:

Specify refund or forfeiture timing tied to documented lender decision.

Key Processing Milestones for a Short Sale Addendum

Track these numbered milestones from submission through closing to manage expectations and record-keeping.

01

Prepare Package

Gather authorization, pay-off statement, hardship letter, and executed addendum.

02

Submit to Servicer

Send package via servicer portal or certified mail, noting submission date.

03

Monitor Response

Log any counteroffers or additional documentation requests; respond promptly.

04

Close or Terminate

If approved, proceed with closing; if denied, follow termination provisions.

Required Data Elements for the Addendum

Property Details: Full street address
Buyer Identity: Full legal name
Seller Identity: Full legal name
Loan Information: Loan number, servicer
Price & Deposit: Agreed sale price
Deadlines: Submission and response dates

Penalties and Risks of an Incorrect or Missing Addendum

Deposit Loss: Buyer may forfeit deposit
Contract Voidance: Agreement may be unenforceable
Title Issues: Unresolved liens block closing
Delayed Closing: Extended lender processing
Legal Liability: Breach claims by parties
Tax Consequences: Possible cancellation-of-debt reporting

Common Preparation Mistakes to Avoid

  • Using inconsistent party names between the addendum and the purchase agreement, which causes title or funding holds and may require corrected documents.
  • Omitting the loan number or servicer name, resulting in misdirected short-sale packages and processing delays from the lender.
  • Failing to attach seller authorization or hardship documentation, which often causes immediate rejection or additional document requests by the servicer.
  • Removing buyer contingencies before receiving written lender approval, exposing the buyer to financial loss if the lender refuses the short payoff.

Tips for Accurate, Efficient Completion

Follow these practical tips to reduce processing time, limit disputes, and streamline closing if lender approval is granted.

Confirm Legal Names
Verify seller and buyer names against title and government ID to avoid re-executions; mismatched names cause delays in funding and closings.
Attach Complete Package
Include payoff statements, hardship letters, tax documents, and authorization to negotiate to prevent lender requests for missing materials.
Use E-sign Where Accepted
Electronically sign and retain audit trails to speed turnaround; confirm servicer accepts e-signatures and whether a notarized original is later required.
Document All Communications
Log submission dates, contact names, and any counteroffers in writing to support escrow and closing instructions and to resolve disputes if they arise.

Real-World Short Sale Addendum Scenarios

These concise examples illustrate how the addendum functions in typical transactions and why specific clauses matter.

Broker-Facilitated Short Sale

A listing broker assembled the lender package and executed the addendum on behalf of the seller

  • Lender issued a conditional approval requiring a modest price reduction
  • With clear deposit protection language, the buyer waited for lender approval and closed once terms were accepted, avoiding a dispute over escrow funds.

Buyer-Protected Contingency

A buyer insisted on an express timely-response deadline in the addendum

  • Lender response exceeded the initial window but provided written extension terms
  • The buyer elected to extend contingencies in writing and preserved the deposit while lender negotiation continued, then closed after approval.

How the Short Sale Addendum Differs from Similar Documents

Compare the short-sale addendum with related documents to ensure you use the correct form for lender-dependent transactions.

Criteria Short Sale Addendum Contingency Addendum
Purpose lender approval clause general conditions
Lender Signature Needed often required not typically required
Deposit Handling specific lender-tied rules buyer-seller agreement
Use Case seller owes more than sale price financing or inspection issues

eSignature Vendor Comparison for Processing the Addendum

Select an eSignature provider that meets compliance, auditing, and workflow needs; the table below compares core commercial options with signNow listed first.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial Verify Verify Verify Verify
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

Common Questions and Practical Answers

Answers to frequent questions about enforceability, signatures, lender timelines, and document corrections help avoid common pitfalls.


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