I feel ignorant for asking this but thought this was the perfect place to do so....

 

If a seller is required to repay the defficient balance of the short sale... is the commission and closing cost included in that amount or does the bank truly pay it?

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For the most part, yes. They will likely take the mortgage balance, deduct the proceeds from the sale of the property, the remainder is commonly called the deficiency. If the lenders are only releasing the lien against the property and applying the proceeds to the balance, then the seller will be responsible for the remaining deficiency.

Don't forget to let the seller know that this balance will become "unsecured debt". In other words, it is no different than a credit card debt, and if it isn't paid will typically be turned over to a collections agency and settled for pennies on the dollar...
The sellers costs are paid through the transaction. If the lender does not fully release the debt, the seller is responsible for the deficiency.

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