Question we sent to BoA on approval letter – “It is confusing.  How do we get deficiency waived?”  BoA Answer - “This is the only approval we have.  It clearly states it’s waived.”

You be the judge.  Just see below.

First, if this is the only approval letter they have, it is the first time I have seen this form – and we usually see a few a week from BoA.

Second, I don’t understand the “clearly states” as described in the email.  First it says that the lender and insurer retain the right to pursue collection of the deficiency.  Next it says that the credit report will show the loan “charged off” and with a balance outstanding, which means there is a remaining obligation.  Lastly it states that the deficiency will be reported to the IRS as income to the borrower, which cannot be if the obligation is still owed to the lender.  (See 1099 REPORTING - IT'S THE LAW! - OR IS IT???)

But that is not all!

Within 10 minutes of getting the “clearly states” letter, we then got – from a different short sale specialist that suddenly got involved – that the deficiency can be waived for a 10% contribution toward that deficiency.  Now I am thinking, why would I have a client make a 10% contribution to a deficiency that is “clearly waived?”

Bank of America is handling a huge number of these files and it really does not surprise me that confusion occurs from time to time – but what if this was a borrower that was not represented by an attorney?  Would they understand the letter?  Would they understand the “clearly stated” email?  Would they understand the “pay 10% of the unpaid principle (sic)” email?

The moral of this true story seems to be, take nothing based upon assumption when dealing with short sales.  Insist on a short sale approval letter with language that is a step above being clear as mud.

See the series of letter and emails below –

Other related articles can be found at: NEW AND CONFUSING BANK OF AMERICA SHORT SALE "APPROVAL" LANGUAGE

BANK OF AMERICA SHORT SALE APPROVAL LETTER CHANGES (Interesting that I wrote this article almost exactly a year ago!)

SHORT SALE APPROVAL LETTER MISREPRESENTATIONS - PROMISSORY NOTE RELEASED?

 

Just for comparison - here is another short sale approval letter from Bank of America received the same week on another file.  Note that the languge is indeed different, so (as we all know) the statement by the negotiator who commented on the top Bank of America short sale letter and said "this is the only letter we have," clearly was not supplying the correct information.  Comparing the two is important to understand what is a waiver of deficiency and what is not. Here is the "other" type of letter:

 

 

 

 

-------------------------------------------------------------

Copyright 2011 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader. Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 Email - RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com Website www.Florida-Counsel.com.

See our easy to understand articles at:
TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES

 

 
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40 Comments on SHORT SALE APPROVAL LETTER WAIVER OF DEFICIENCY CLEAR AS MUD

20 Most Recent Comments Displayed Show All

NOV
16
2011
179,321 Points 51 Featured Posts Outside Blog Hit Router Attended Rain Camp

Judy -

I just happen to be running the formula on a string of 28 computers and my IT department guru's say it should be finished computing your answer is 74 years.  Now if I only had faster processor chips!
10:19pm • #22
265,057 Points 3 Featured Posts Outside Blog Attended Rain Camp

The letter pretty clearly states that the lender and investor reserve the right to pursue the borrower for any deficiency. Hard to miss or misconstrue that statement. Any on-line communication or phone conversation does not change the meaning and substance of the approval letter.

You wanted a different outcome but you did not get it. Perhaps you can get what you want if you continue to negotiate.

As for the 1099, the bank will charge off the loss and take a tax loss offsetting same with a 1099 report to the borrower who may become liable for the tax on forgiven debt. If the bank subsequently recovers from the borrower, the bank will have additional taxable income and the borrower will have an equivalent reduction in the amount of forgiven debt.

CAVEAT: I am not an attorney or tax expert so you can say that I am misguided in my opinion with complete comfort…or can you?
10:59pm • #23
152,994 Points Outside Blog Attended Rain Camp Called Shot Master

Very handy example letters and comparisons for working in the wild wild west of short sales.  Thanks.
11:38pm • #24
NOV
17
2011
872,158 Points 47 Featured Posts Localism Sponsor Attended Rain Camp Called Shot Master

Exactly what I was going to say from Michael at #25 above. Short sales are the new wild west and we are all cowboys and you, Richard are a Sheriff tryingi to make sense of it all!

Sharon
12:00am • #25
Outside Blog Attended Rain Camp
Wow... Thanks for the excellent and informative post!
12:14am • #26
Hi, I live WA state...had an offer on my home like 6-7 wks ago still has not been excepted by the bank or turned down. Why does it take so long to hear if they even have excepted it or not? I know all lenders are different but really! Lisa
Lisa
1:15am • #27

Thank you for the post Richard... I had a BOA short sale this year (I had the buyer) and we went round and round through 3 different negotiators at BOA on the file during the course of the sale.

It is absolutely criminal what these banks are able to get away with... and the general public has no clue as to how bad the system is broken... I was able to tell my buyer the following when she finally reached the point where she wanted to sue and report BOA for jerking all the involved parties around...

"I told you when we started this deal that it was going to be a long, tedious, ridiculous process and if we are lucky, you will get the house in the end.... Now you are seeing the ugly inside of what goes on in the short sales we handle.... nothing like what you see on the news or read in the newspaper"

The billion dollar question is how to make banks accountable.... until outrage hits the level it did with the $5 debit card fee that got recalled, NOTHING will change!
5:47am • #28
1,452,111 Points 46 Featured Posts Outside Blog Called Shot Master

Thank you for the post. I thought things had improved with Bank of America short sales.
6:53am • #29
140,055 Points

I have not seen this type of letter from Bank of America yet.

 

Thanks for the heads up
8:00am • #30
Localism Sponsor Outside Blog

BOA is clearly trying to get some people to fall for that trap!
8:30am • #31
1,390,385 Points 27 Featured Posts Hit Router Called Shot Master

B of A sure doesn't seem to be making this any easier, do they?  Just when somethings seem to be a bit more streamlined, they throw new wrinkles into the mix.
8:41am • #32
837,527 Points 69 Featured Posts Outside Blog Called Shot Master

I have come across this before in a short sale. After months of haggling and wasting time (banks excel at this), We reached a "happy" point and I instructed everyone to move forward. I get the settlement letter and it is completely the opposite of what we discussed several times already. I get the negotiator on the phone...(daunting) and start telling her what kind of person are you where you say one thing and then sneak something in documents in small print contrary to what we agreed to? I literally told her professionally off. She claims she didn't know and took it out...we closed after that. SHE  DIDNT KNOW? Good one Richard
11:00am • #33
1 Featured Post

I have seen this several times in tehe last year. It is a strong arm tactic. I have blacked out the objectionable text, stating clearly that these were terms previously agreed on, and that the terms are immutable. I stick my ground, and also remind them that we are both looking at the same financial condition, and there is nothing to repay a deficiency, and that the terms wer that the sale is to be considered a payoff as agreed, on the credit report.

They will hold out now on the letter until two or three days prior to closing. This is intentional, and a negotiating tactict o get more money from the borrower. You just have to stick to your guns so much these days.
11:21am • #34

This is exactly why I require every seller to have legal councel. It blows my mind when short sale negotiators or agents take it upon themselves to explain the raminfications (if they do at all) of an approval letter.  When we get an approval, it is sent to the seller's attorney and we discuss it, then the attorney presents and explains it to the seller.

www.ssnegotiators.com
11:51am • #35
548,104 Points 9 Featured Posts Outside Blog Called Shot Master

Richard:

Your blog and your frustration with lenders, BofA, is why I have elected not to do short sales.  Our E&O attorney was in the office recently and she advised that we first refer our short sale clients to attorney and tax experts.  There is so much liability involved in these transactions, that I have decided to leave short sales to my colleagues.
12:25pm • #36
227,267 Points Outside Blog Attended Rain Camp Called Shot Master

Richard -- there must be a better description than "mud" to describe their clarity.  Then you add in contradictory and convoluted, and you get close to how they are handling these sales.

And people wonder why the banks aren't getting their inventory cleared.
6:51pm • #37
NOV
18
2011
152,333 Points

Yep, I would agree that it's clear as mud.

Great post, thanks for sharing it.

 

 

 

 

 

 

.
1:31am • #38

Sounds like another 'Big Bank' I tried to buy a REO from.

THey slipped in at the last minute an additional 'Title Rider', as in, "oh by the way, we need this one signed too, no biggie'.  To sum it up, the property was the subject of another lawsuit, yet would they not provide doumentation of it, AND that it was subject to further transfer regardless of this sale.

When we refused to sign that one, they even tried to keep the earnest money.  None of that language was in the original offer or the followup addendums. 

We got our oney back and RAN.  I saw someone else bought it a week or two later.  Good luck to them!
3:50pm • #39
NOV
28
2011

Hi Richard,

 

I love your blog, you have tons of useful information on here.

I currently have a 10,000 sq. ft lot listed as a short sale in Palm Coast and I am looking for legal advice.

Do know of any attorneys in Flagler County that I can contact?

Thanks,
Ronnie
8:41pm • #40
NOV
29
2011
179,321 Points 51 Featured Posts Outside Blog Hit Router Attended Rain Camp

For legal advice, we cover the entire state of Florida, including Flagler county.
6:11am • #41

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Richard Zaretsky, Florida Real Estate Attorney

West Palm Beach, FL

More about me…

Richard P. Zaretsky P.A. - Board Certified Real Estate Atty

Address: 1655 Palm Beach Lakes Blvd, Suite 900, West Palm Beach, Fl, 33401

Office Phone: (561) 689-6660 x 107

Cell Phone: (561) 329-2279

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