Be very careful making statements.
Eric
I agree a major benefit for one to work with you is you are an advocate for them in an effort to TRY TO PERSUADE the bank not to come after them but their are no guarantees and if we told the customer anything to the contrary we (or you) could be sued or even worse. My partner and I have completed numerous successful short sale transactions. (2 dozen plus) I feel we have good understanding of what works and what doesn't (although that is constantly changing.)
You stated
seller is assured they will not get a 1099 or a judgment against them for a deficiency balance… since I make sure the short sale agreements say so.
I think you may have made a statement that could leave you in a precarious spot. ALL of our short sale P&S's state much of what you mentioned, that the sale is contingent on the bank NOT issuing a deficiency judgement. We do not ask that no 1099 be issued because chances of them agreeing to that in writing we have found are close to nil. (I will come back to this latter.) The bank may not issue any of the above if the owner is willing to sign a promissory note. Doing that though will mean they will have to pay the bank, (maybe not all of the deficiency) just over a period of time. In regard to the deficiency judgment just because you have it in the agreement does not mean they will honor it. It is the owner that signs your agreement not the bank. I have found the bank issues an approval with some of the conditions stated in writing. If they do not mention either of the above they have 90 days to issue the deficiency judgement. If that does not happen there is a good chance they will issue a 1099. As for the 1099 if you speak with your accountant and the owner can prove he/she was insolvent at the time they will most likely not have to pay any tax. (Also new legislation may help as well I need to read up on that). All of the above may not be ABSOLUTELY correct but I think it is pretty close. Please don't hesitate to critiqued what I have said or show us a better way.
Edited: PS: Some how this ended up here when I had intended this as a reply "tomsedwick"
thread about Money to seller on a short sale