What Are The Deficiency Liabilities Of A Short Sale?

A seller could be subject to a deficiency judgment for the difference between the loan amount
and the amount of the loan paid off as a result of the short sale.  The lender has sole discretion
whether to pursue a deficiency judgment in those instances when a judgment is permitted.
Whether a lender files a deficiency judgment or not, depends in large part on who is negotiating
your sale.  The truth is, there are options if you are informed. So many of the real estate agents
and investors claiming to do short sales, learned from some weekend training and have no clue
how to properly negotiate the deal.

Experience has shown that while the majority of lenders don’t pursue a deficiency
judgment, occasionally one will, or it may be issued by the PMI (mortgage insurance) carrier.
This can always be determined well before the final settlement and can often be negotiated.
Where the lender or PMI carrier will not agree to sign off from pursuing a deficiency judgment,
the homeowner will have the option of agreeing to the payment or backing away from a
short sale agreement.

It should also be noted that the few lenders and PMI Companies that do issue deficiency
judgments, are now doing so through Non-Secured Promissory Agreements, offering low or
zero percent long-term repayment plans.

HINT: Make sure your short sale agreement includes an assurance that no deficiency will be pursued after closing.

Don Mailey

RE/MAX Results

952-212-0968

Don@DonMailey.com