With many homeowners left with no other option besides a short sale or a foreclosure something to watch out for is what is called a deficiency judgment. These allow the bank to go after the borrower(s) for the difference between what the property sold for compared to the amount owed on the balance.
This can often happen after borrowers have begun to re-establish themselves.
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Certain states are known as non-recourse states, where the laws do not allow the lender to go after the borrowers. Laws vary widely across the US and vary greatly from bank to bank. Maryland, the District of Columbia, and Virginia have laws that allow the lenders to try to get their money back. The good news is that not everyone who sells short or forecloses is being pursued for the unpaid debts. However, with the high rate of foreclosures and banks suspect that some borrowers may still have assets lenders have been more aggressive trying to collect deficiencies. |
The key point to understand when going through a short sale or deed in lieu is that lenders may release borrower(s) from the title without releasing borrowers from their obligations to pay under their note. If you have a short sale or deed in lieu of foreclosure make sure you obtain the release from the bank.
If you have any questions or doubts about your circumstance, legal advice is your best resource, but your trusted real estate agent or loan officer may be able to provide some general guidance. Feel free to contact me anytime - (301) 585-7283.
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