Deficiency judgement after a short sale

[Matt A]

Hello CTC,

I have a concern. I recently had a short sale approved in California through B of A and the buyer wants to close asap. I got a letter from B of A stating "BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment recieved and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above."

Can they really come after me for the difference? I thought this was the whole purpose of the short sale...to avoid it. I've relocated and find a new career so I don't want to risk taking that hit. Any advise?

Matt

[Scott Hubbard]

Originally posted by Anna Estes:

James,
"As far as never having a customer pay a contribution, good for you, but my bank does not allow that in most situations. If we are going to forgive a customer of 100k in debt, they can and should contribute something towards their obligation."

Please tell us which bank do you work for?

Let's educate Matt and others about short sales and why lenders ask for contributions.

In anti-deficiency states, lenders do not have as much leverage. Therefore, their terms are sometimes boilerplate and can scare most lamens. In states where laws offer little protection from deficiency judgments, these boilerplate terms can have major consequences. So, as many here have already stated seek counsel including tax advice.

Many times, in states where there are anti-deficiency laws, lenders may require an unsecured promissory note since they cannot file a judgment. Since most of these lenders are using TARP, I just tell them you already owe them money and it will be an accounting nightmare to keep track of the debit and credits.

Truthfully, loss mitigators, asset managers, negotiators, have one function and that is to protect RE assets and to charge service fees to their investors. These are not bad people, they just are trying to pick up the pieces of a shattered industry. So my second piece of advice is to not take any advice from them and certainly do not use the agents they recommend.

A good negotiator helps two diametrically opposed parties compromise. So, my last piece of advice for people who are contemplating a short sale, make sure you find out if the agent, negotiator, investor will use verbiage that helps protect your interests.

For you bank employees, a little piece of advice. A loan modification is a future short sale, but a short sale is a future performing loan. Just say NO to REO's!