John Marzy

Home sales have become increasingly popular. Home owners unable to make their mortgage payments will eventually find themselves being served with a foreclosure notice from their bank or lender. In order to stop the foreclosure they can opt to ask if they may move towards a short sale. This is an agreement between the lender and homeowner to sell the home at a discount, which sometimes ends up being less than the actual mortgage balance. The difference that results is called a deficiency.

To give you a better understanding of how a deficiency happens here is an example. At the time of impending foreclosure the house goes into a sale. The lender agrees to stop the foreclosure process and put the house up for sale. The house sells but it’s not for enough to pay off the mortgage entirely. The balance owing by you on the mortgage is $100,000. The short sale results in the home being sold for $70,000. Now here is a deficiency of $30,000 and lender has to absorb this loss.

Although it is not common, the lender may decide to turn around and sue for the difference. Most lenders won’t sue for smaller amounts because to do so, they would then have to hire expensive lawyers, file a lot of paperwork and spend more money on the court proceedings. It is all very time consuming and costly. Most lenders today aren’t suing homeowners as there is simply no money to get even if they won a judgment. Most banks will release the owner during the Short Sale if the Realtor or Agent demands it for their client. This is one of the greatest things a good Agent can do for his client.

Here are other options homeowners have:

• Deed In Lieu of Foreclosure. This is an agreement drawn up in advance that states the lender will not sue you for the deficiency (if the form is provided by the lender). You are agreeing to give up the deed to the house in exchange for complete absolution of the difference. It is strongly recommended you get this agreement done.

• One of the other methods is to take a chance on the short sale and to demand to be released at the end of the Shortsale.

• Lastly, some finish a Short Sale and then declare bankruptcy if it all goes bad. Too many owners file bankruptcy when they didn’t need to. My experience is to not file unless the bank is proceeding against you, but ask an attorney for legal advice as I am a realtor and broker and not an attorney. If home sale creates a deficiency that is more than you would ever be able to pay off then bankruptcy may be the only solution. Bankruptcy will scar your credit rating but if you don’t declare and the lender files a judgment, they may have the right to go as far as garnishment of wages. Save yourself the headache and protect yourself from a judgment right at the time of short sale.

At our real estate office in Dublin California, we are located in the Tri-Valley area of East Bay. We specialize in Short Sales, taking great care of our clients and to get a full release for client’s Short Sales. If you live somewhere else, do a search for your realty offices and find a Short Sale Specialist. I train my agents in how to accomplish Short Sales correctly and efficiently. We usually have a home under contract in less than 30 days, with many in just a week. Short Sales work, I promise.