Short Sale Affidavit Tweaked to Curb Liability

By Robert Freedman, senior editor, REALTOR® Magazine

The affidavit that Freddie Mac requires servicers to obtain in short sales has been changed at NAR’s request to reduce what was seen as an unreasonable amount of liability risk to practitioners. Freddie Mac requires the affidavit to reduce illegal flipping and collusion between buyers and sellers but NAR members said the language held them liable for situations over which they had no control. (See a past blog post.)

Months ago NAR brought these concerns to the company’s attention, and the result is the revisions to its required language.

The biggest change has to do with what’s known as joint and several liability. In essence, this extends to agents liability for false statements made by others involved in the transaction, even if agents know nothing about the statements. To be sure, agents can fight to get the liability removed, but you can imagine the work and headache that’s required to win that argument.

The company made other changes to its language, and the bottom line is, the liability risk now is much more appropriately aligned to practitioners’ role in the transaction.

NAR has since created a resource page with more information on the change. There’s a link to Freddie Mac’s policy and to a bulletin the company put out on the change. There’s also a copy of NAR’s letter expressing its concerns.

In the video above, NAR Managing Director of Regulatory Policy Jeff Lischer talks about the new language and what to do if you’re in a transaction and the servicer is using the old language.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at

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  1. Thank you for keeping us updated

  2. Ron Perry

    I was a REALTOR for 30 years in Az… I am wondering about the Obama Health Care rules that say if you sell your house in 2012, you will have to pay 3.8% tax to the Federal Gov’t…It’s in the Health Care bill….
    Is this true????

  3. Robert Freedman

    Thanks for your question. You’re referring to a fee on a portion of investment income for high-income households that goes to Medicare. The 3.8 percent tax applies, starting in 2013, to a small portion of investment income realized by a narrow band of taxpayers. The vast majority of households selling their house once the tax kicks in won’t be affected by it. You have to earn at least $200,000 (as an individual) or $250,000 (as a married couple), and on top of that the capital gains exclusion on the sale of a house ($250,000 for individuals and $500,000 for married couples)remains in place. So, if a household meets the income floor, they still get all the capital gains exclusion on the sale of their house ( up to the $250,000 and $500,000 limits). Then, on eligible investment income, there’s a tax for amounts over and above that capital gains exclusion. Let me direct you to this blog post we did explaining how it works:

    Thanks again for your question.
    Robert Freedman