SELLER’S AFFIDAVIT OF UNDERSTANDING
THIS IS AN IMPORTANT LEGAL DOCUMENT CONCERNING THE SALE OF YOUR HOME AND SHOULD BE READ CAREFULLY. IF YOU HAVE ANY QUESTIONS CONTACT AN ATTORNEY BEFORE SIGNING.
Please initial each number after your read it and understand it. Also fill in all blank lines. If not applicable, enter N/A.
STATE OF CALIFORNIA )
) ss
COUNTY OF ______)
The undersigned, being duly sworn, deposes and says:
_____ 1. I have entered into a Residential Purchase Agreement, plus addendums (collectively referred to as the “Agreement” or “Contract”), to sell my real property to the following person(s), who shall be referred to in this Affidavit as the “Buyer”:
______
The property that I am agreeing to sell _____ IS or _____ IS NOT my principal residence.
The common address (Street, City, & State) of the property (“Property”) is:
______
_____ 2. The property is security for one or more loans and may be encumbered by lenders, mortgage holders, trust deed holders, creditors, and/or governmental entities (all of which will be referred to as the “Lienholders.”) I am currently in distress about, or default of, at least one loan for reasons which have nothing to do with Buyer. I am unable to make up my back payments or continue making further payments. I have attempted other ways to remedy my financial situation, including:
_____ Researched the value of the Property
_____ Attempted to restructure credit card payments, other debts and my household budget
_____ Contacted my lender(s) for a loan workout solution such as a loan modification
_____ Contacted a free, non-profit foreclosure prevention counselor (see www.hud.gov )
_____ Contacted a lawyer or legal aid about alternatives to foreclosure
_____ Used other resources: ______
_____ 3. I reasonably believe that:
_____ a) I have NO equity in the Property
OR
_____ b) That there is $______or less in equity in the Property.
_____ 4. I understand that Buyer cannot and will not purchase my property until such time as my Lienholders approve a reduced loan payoff, known as a “Short Sale.” I understand that I have no right or entitlement to a Short Sale which may or may not be approved by my Lienholders.
_____ 5. Buyer has not made any promises to me whether or not my Lienholder(s) will agree to a Short Sale or whether or not Buyer or its designee will be successful in obtaining a Short Sale. I understand that if my Lienholder(s) does not agree to a Short Sale which is satisfactory to Buyer, then the Property is likely to go to foreclosure if I don’t take other action.
_____ 6. I understand that my Lienholder(s), even after agreeing to a Short Sale may require that the difference between the original balance and the negotiated balance be paid by me and hold me personally liable for such payment. Should any Lienholder(s) not require payment of the difference, this act may constitute a taxable event. I acknowledge being advised to contact a tax professional relating to the potential taxable consequences, if any, of the Lienholders’ forgiveness of any debt and the application of H.R. 3648 (110th Congress) or other tax statutes, codes and rulings relating to my unique situation. I have further been advised to review IRS Publication 4681 and IRS Form 982 which can be found at www.irs.gov .
_____ 7. I understand that Buyer, Buyer’s representative, or a short sale processor agreed to by Buyer and me/us (referred to as the “Buyer’s designee”) will attempt to process a Short Sale with some or all of the owners of the liens on the Property. I understand that Buyer or its designee will not be doing this on my behalf, but on Buyer’s behalf in trying to purchase the Property. Buyer has not made me any promises, guarantees or representations about its ability to complete this task. I understand fully and completely that, if Buyer’s designee is not able to negotiate the Short Sale with the Lienholder(s), the Lienholder(s) may proceed with foreclosure or other means of forced collection. I further understand that if the Lienholder(s) accepts a Short Sale, this may or may not relieve me of my personal responsibility for the loan, may be reported to credit bureaus, and may affect my credit score. I also understand that any forbearance or forgiveness of debt by Lienholder(s) may result in a taxable gain. I should consult with a qualified tax professional to discuss the implications, if any, if I should receive a form 1099-C from any Lienholder(s). The Buyer is not able to advise me about issues including, but not limited to, what is acquisition indebtedness, what is a qualified principal residence, and under what taxpayer status I should file. I understand that it is impossible at this time to know whether any Lienholder will satisfy my obligation(s) or merely release the lien. I hereby acknowledge that (initial either a or b):
______a) If a Lienholder does not allow a total and complete satisfaction of the debt, I presently prefer that the Property proceed to foreclosure,
OR
______b) If a Lienholder will agree to a Short Sale to avoid foreclosure, but only release its lien without satisfying the entire debt, I view this as an improvement over my current circumstances and I presently expect to accept such terms in order to avoid foreclosure.
_____ 8. I understand that my Lienholders will require review of my personal financial information including but not limited to copies of tax returns, bank statements, investment account statements, and a financial statement. By agreeing to pursue a Short Sale I grant Buyer’s designee permission to release this information to those parties assisting the with Short Sale and hereby hold Buyer and Buyer’s designee, agents, assign, employees, managers and officers harmless from any violations of privacy which may result from the release of such information.
_____ 9. I understand the Short Sale negotiation process is a lengthy one and that it may take several months or more to get an approval.
_____ 10. I understand that Buyer makes no promises or obligations as to curing back payments or making additional payments on my loan(s). Even if Buyer cures any back payments on my loan, I understand that this does not obligate Buyer to continue making payments. At Buyer’s sole discretion, Buyer may decide not to make payments on my underlying obligations at any time.
_____ 11. I agree to vacate the property before the Closing Date, as provided in the Agreement, and to leave the Property in a neat and clean condition and free from all personal effects, furniture and debris. I also acknowledge that I may be assessed an occupancy charge much greater than daily rent if I, or anyone acting under me, do not timely leave the Property. I understand the occupancy charges are a form of damages for delay and do not constitute the formation of a lease, rental agreement, lodging agreement or tenancy agreement of any kind.
_____ 12. I agree to waive any rights I may have to any prepaid or escrowed property taxes, insurance, homeowner’s association dues, county property tax refunds or other amounts held by any party in escrow, including, but not limited to lenders, homeowner’s associations and insurance companies.
_____ 13 I have had the opportunity to seek real estate, legal, tax and financial counsel as to the implications of this transaction. I understand that Buyer is not my agent, representative or real estate agent in this transaction and is not acting on my behalf. Buyer has made no representations as to the value of the Property or about my legal rights or alternatives with regard to the property. If Buyer is working with or represented by a real estate broker, that broker is not acting, and will not act, on my behalf. I have been advised that I may have my own independent real estate broker working on my behalf and have chosen either:
_____ a) To have my own real estate broker in this transaction,
OR
_____ b) To waive having my own real estate broker in this transaction.
_____ 14. I UNDERSTAND THAT THIS DOCUMENT DOES NOT DEFINE OR EXPLAIN MY RIGHTS OR ALTERNATIVES, and I have had the opportunity to seek legal, financial, tax or other professional counsel to weigh my alternatives, my rights and the legal consequences of this transaction.
_____ 15. Buyer desires to purchase the Property in accordance with the Contract. This is considered the “first sale.” The Purchase Price under the Contract is a liquidate value which may be considerably less than fair market value. Buyer intends to promptly or immediately sell the Property to another buyer, known as the “end buyer”, through a second escrow and closing known as the “second sale.” In order to accomplish this, the Contract gives Buyer and/or Buyer’s agents, the rights to market, immediately list for sale, which includes but is not limited to the local multiple listing service (MLS), negotiate and enter into a contract to sell the Property immediately to a third party who must not be related to me. I and my broker, if any, agree to cooperate with Buyer in identifying the transaction as “active” or “available for purchase,” or some similar designation allowed by the multiple listing service, and to identify that Buyer is marketing the Property on Buyer’s behalf for the second sale which is contingent upon successful closing of the first sale. The Buyer’s sale price for the second sale may be substantially higher than the Purchase Price under the Contract because Buyer’s sale price represents a price closer to fair market value
_____ 16. I understand Buyer may assign or otherwise transfer the Contract or contract rights to another party for a profit and that I may be closing the sale with someone other than Buyer. I have agreed to cooperate with this assignment or transfer of rights and to execute the documents Buyer presents to implement it. I also understand Buyer may close in the name of a nominee or related company, or may choose to immediately or promptly resell the Property to another party for a substantial profit.
_____ 17. I understand that Buyer agrees to provide me with copies of both the Contract and all documents relating to the assignment or other transfer of rights described in paragraph 16 above within 5 business days of the complete execution of such documents. I may request additional copies of these documents at any time by paying the cost of reproduction.
_____ 18. I understand that I may have certain rights under State or Federal law, including, but not limited to bankruptcy, redemption or other equitable rights that may give me additional rights. This disclosure is not to be construed as a list of my rights or legal advice, but simply an acknowledgment that I have had the opportunity to investigate my rights under the law. I understand that I may want to consult with legal counsel regarding these possible rights.
_____ 19. I understand by signing the Contract, I have agreed to sell the Property to the Buyer and am bound by the terms and conditions described in the Contract. I further understand that I cannot continue to market the Property to any other party, except as provided herein. However, Buyer has advised me that, if Buyer receives any offer which would be sufficient to pay all of my Lienholders in full, plus the marketing and closing costs of the sale, then Buyer would give me the opportunity to accept that offer on my own behalf.
_____ 20. I UNDERSTAND THAT BUYER’S INTEREST IN THIS TRANSACTION IS SOLELY AS AN INVESTOR WHO INTENDS TO PURCHASE THE PROPERTY AND TO PROMPTLY SELL OR RENT IT FOR A PROFIT. I UNDERSTAND THAT SUCH RESALE MAY TAKE PLACE IMMEDIATELY AFTER BUYER’S PURCHASE FROM ME AND THAT BUYER MAY EARN AN LARGE PROFIT FROM THIS TRANSACTION. THIS PROFIT IS BUYER’S PRIMARY MOTIVATION FOR ENTERING INTO THIS TRANSACTION.
_____ 21. I understand that I have no right or option to re-purchase or live in the Property once title has been transferred to Buyer. Buyer has made no representations, oral, in writing, express or implied, that I will have the opportunity to re-gain ownership of the Property after Closing.
_____ 22. The Buyer has agreed to pay me the Purchase Price on the Closing Date, which is fair and adequate consideration for my rights in the Property based on the current circumstances of default, even if this may be less than I might be able to gain from either curing the loan and/or negotiating a workout or forbearance with my Lienholder(s) and/or refinancing the debt and/or placing the Property for sale on the open marketplace either myself or through a real estate broker. I knowingly and willingly agree to accept the ultimate Purchase Price knowing these options and other potential options are available to me. I have not been promised any other consideration or money other than as stated in the Contract. I have not been promised anything other than what is described in the Contract. There are no unresolved issues, no “side agreements,” and there are no other terms not disclosed in the Contract, except for an agreement with the short sale processor/negotiator, if any.
_____ 23. I understand that the Buyer is not in any way acting on my behalf as a counselor, advisor, consultant or non-profit foreclosure prevention agency. I understand that Buyer may make a substantial and immediate profit from this transaction and that its primary motivation in engaging in this transaction is to make a profit from the prompt rental or resale of the Property.
_____ 24. I understand Buyer has chosen to close this transaction with a specific two sale formal process and with a specific title company or escrow company to facilitate this process. Buyer may choose to record a Memorandum of Contract For Sale and Purchase (or similarly titled document) and an update(s) to the Memorandum. I also understand that this transaction may not involve title insurance or any title guarantees normally associated with a real estate transaction.