Short Sales May Not Solve All Problems
If you think a short sale or foreclosure will solve all your real estate financial problems, you better think twice.
Recently, mortgage companies have been more and more active in trying to collect ALL the money owed. They may approve your short sale, but that does not mean you're out of the financial woods.
In Florida, lenders have the right to pursue borrowers for the difference between what their house sold for and what the borrower actually owed on it. This is called a deficiency judgement. Even though your house has been sold through a bank approved foreclosure or short sale, the deficiency claim can still be filed by the lender.
From what I am told, the lenders don't always file a deficiency suit. They kind of wait-n-see who has assets that are worth going after. If you have assets, you might receive a shocking letter in the mail that says the bank wants the balance due.
The other thing I have been told is that if there is a second mortgage on the property, you are more likely to face a deficiency claim. The second lien holder often gets virtually nothing from the short sale or foreclosure sale. In fact, they are generally last in line to get money from your sale. These lenders are much more likely to to pursue the deficiency suit.
Remember this: Just because the property has been sold in a bank approved short sale or sold by the bank through a foreclosure sale, borrowers should never assume the amount of the deficiency has been forgiven. You should always check with your attorney to receive advice on how to avoid a deficiency claim. It might be that bankruptcy can help you or a written waiver from the lender stating that the shortfall has been forgiven. Discuss these options with your attorney.
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Recently, mortgage companies have been more and more active in trying to collect ALL the money owed. They may approve your short sale, but that does not mean you're out of the financial woods.
In Florida, lenders have the right to pursue borrowers for the difference between what their house sold for and what the borrower actually owed on it. This is called a deficiency judgement. Even though your house has been sold through a bank approved foreclosure or short sale, the deficiency claim can still be filed by the lender.
From what I am told, the lenders don't always file a deficiency suit. They kind of wait-n-see who has assets that are worth going after. If you have assets, you might receive a shocking letter in the mail that says the bank wants the balance due.
The other thing I have been told is that if there is a second mortgage on the property, you are more likely to face a deficiency claim. The second lien holder often gets virtually nothing from the short sale or foreclosure sale. In fact, they are generally last in line to get money from your sale. These lenders are much more likely to to pursue the deficiency suit.
Remember this: Just because the property has been sold in a bank approved short sale or sold by the bank through a foreclosure sale, borrowers should never assume the amount of the deficiency has been forgiven. You should always check with your attorney to receive advice on how to avoid a deficiency claim. It might be that bankruptcy can help you or a written waiver from the lender stating that the shortfall has been forgiven. Discuss these options with your attorney.
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posted by Terry Ward at 8:32 AM
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