Clauses : The Exculpatory Clause

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Education & Training with (retired) TN LIC# 290452
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                                                     exculpatory

The word means to "clear from blame or remove guilt".

One of best things about the exculpatory clause is that it allows a buyer to purchase a property without any personal liability.

In an exculpatory clause, the liability may be limited to the property itself and may not extend beyond the liability which involves the property.

If a buyer defaults on a loan with an exculpatory clause and the seller of the lender forecloses and they take the property back, with the exculpatory clause that might be all they can take from the buyer.

A buyer's credit might be spared with the inclusion of such a clause in their contract.

If the seller is going to carry some of the financing for the buyer and the note is secured by the real estate with the seller this clause may be included.

As an example, if the seller is listing the property for 200 thousand dollars and the first mortgage has an existing balance of 75 thousand dollars on it, and the seller is willing to sell the property for a downpayment, (with the buyer taking over the first mortgage and the seller accepting a note for the difference) if the buyer signs for the property subject to the existing first mortgage, and includes an exculpatory clause that says " ...the liability shall be limited to the property itself and shall not extend beyond the liability of the property", the buyer is relinquished of any responsibility in the case of a default to the seller and their credit spared.

The buyer is absolved. (maybe)

Chime in legal eagles !

Next: The Subordination Clause

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David Saks



Time&Temp Memphis

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