Real Estate Investor · Austin, TX · Member since 2009 · 118 posts · 76 votes
If you live in a state where the bank can sue for deficiencies, what is the actual likelihood of a unemployed, broke homeowner going through a short sale being sued for deficiency?
I hear there are more lawsuits than ever by banks, but are they mostly going after people who can afford but choose to walk away or investors who have money but don't want to lose anymore?
What is the likelihood of the average Joe who is in financial hardship being sued by the bank for deficiencies?
Real Estate Investor · Kalamazoo, MI · Member since 2010 · 681 posts · 241 votes
16y
It really depends on your negotiator. We seldom see a deficiency. That's because our negotiator is one of the best, and he negotiates to NOT get a deficiency for the homeowner.
Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
16y
Originally posted by Tom Bukacek:
If you live in a state where the bank can sue for deficiencies, what is the actual likelihood of a unemployed, broke homeowner going through a short sale being sued for deficiency?
There is a lot of confusion with regard to anti-deficiency states and collection of loan losses. Even if the seller is in an anti-deficiency state, it does not mean they will be absolved of the loss. It may just simply mean the lender or its beneficiaries cannot sue. They may not be able to sue, but they still might be able to collect.
As far as the likliehood of being pursued, it should be considered that most lenders will sell the bad debt or collect on the debt themselves if they so have the right.
This is why it is critical to read carefully the approval letters because it is there you will be able to best measure the risk.
Originally posted by Tom Bukacek:
I hear there are more lawsuits than ever by banks, but are they mostly going after people who can afford but choose to walk away or investors who have money but don't want to lose anymore?
Broke or rich, deficiency rights or not, I would assume collectors do not care of your financial situation. There certainly is value in those losses and all of the financial information your submitting to the bank for the short sale review will be fodder for the step. COLLECTIONS.
Originally posted by Tom Bukacek:
What is the likelihood of the average Joe who is in financial hardship being sued by the bank for deficiencies?
If the lender has rights to file a deficiency, they will usually weigh the costs to pursue a judgment against both the amount of the loss and they perceived likliehood they will collect.
Take a guy who filed for bankruptcy in 2006, is employed, is in his 30's, has a deficiency of more than $20K and resides in Minnesota. Well, it is very likely he will end up with a deficiency because Minnesota allows for one, he has already filed BK and Cannot file agin for several years, he has income to garnish and has many years agead of him to pay.
There are many factors which go into a decision like this, but it is really not for us to speculate. Rather, it is the borrower responsibility to get advice and for the investor/agent to do his or her job to remove as much risk as possible by getting the the lender to wiave its rights.