You stand to lose the principal and accrued interest as well as other penalties.If you are not willing to just get your money backin a payoff from a junior lender or going to foreclosure and selling the property to cure the deficiency, then you should not be lending.

The notes become unsecured and the lender can still sue for any deficiency.

Is the state in which the property is located an anti-deficiency state?

If you do one of those will they agree to no deficiency?

You should also tactfully explain that whether the lender allowed the short sale for $1 or $1,000,000, it will not matter to the homeowner (as long as the deficiencies are waived and it is their primary residence), as they are not allowed to receive anything at close.

Get them to request:1) Fully released liens.2) No deficiency Judgement.Also make sure that the items in the Acceptance Letter are followed to a "t".Hope this helps!

What about a deficiency waiver?

They will not get a 1099 for the deficiency.

Additionally I have been hit with deficiency judgements on the two properties that went back to the bank, both for overinflated values.

I am in a non deficiency state and would not face recourse from the banks if the properties went through foreclosure.If I could do it again, I am confident I would be able to find a great cash flowing property.