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Short Sale Tip

This past weekend, I read two articles on short sales in our local paper. One crucial point that was not mentioned is that upon the conclusion of the short sale the lender can still pursue a deficiency judgment against the home owner or issue a 1099 to the home owner for the amount of loss suffered by the lender. If you are negotiating a short sale make sure to obtain a wirtten agreement from the lender waiving their right to a deficiency judgment or issuance of a 1099 Not all lenders will agree but it doesn't hurt to ask.

Posted by Steven Leitman on 11/15/2007 08:29 AM

Comments (7)

short sale, deficiency judgment, 1099

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7 Comments on Short Sale Tip

NOV

2007

Thanks for the info. Sadly I'm sure I will use it.

Also, many lenders will not approve a short sale, they are not obligated to do so. Usually a true and verifiable "hardship" must exist. I've read that at times it is financially beneficial for the lender to foreclose.

Steven,

I worry about real estate people taking advice from news papers, most paper's real estate sections are best used to train puppies or decorate the bottom of bird cages! In Neptune Beach you may find they're vary useful for cleaning up after catching fish.

Lenders accept "Short Sales" when it's in their best interest, not the debtor's!

If the lender doesn't forgive the deficiency it's a release of collateral not a short sale.

If any portion of the loan is forgiven there is tax due, weather or not they 1099 you.

Hardship is defiantly a consideration! How will the debitor's hardship affect the bank! Just having no equity is not a hardship for the bank if the debtor is collectable, after all they make 103%, 107%, and often 125% LTV loans.

People think there is an entitlement to "Short Sales" they are very mistaken!

You're abosulatly right about asking, if you can come up with any plausable reason why it might be in the bank's best interest. The worse they can do is say no.

Bill

William J Archambault Jr

The Real Estate Investment Institute

First National Mortgage Sources

NOV

2007

Bill, when the default on Mtgs. in some areas is severe and causing a glut of foreclosed homes, is it not wise for a Lender to seriously consider 'Short Selling' as many of their outstanding mtgs. as they can, simply to avoid getting these properties stuck on their books with all the attending costs (accounting, legal issues, accural of taxes etc.)? Also considering few investors to deal with auctions or REO sales.

For a Lender/Servicer to get $70 or $80k on a $100k piece of 1st mtg paper is better than a house sitting in their parking lot, so to speak, costing them big time. Also, remember THE DEEP DISCOUNT they probably picked up the property for in the first place when they purchased the 'Sub-Prime' BUNDLE of mtgs. ! Bill, Do you have any idea what the discount range has been when these BUNDLES move from company to company, or bank to servicer, or predatory lender to predatory servicer. They aren't sold at the face value of the mortgage for each and every Mtg. I'd appreciate your feedback on this.

The term 'Bank" is used frequently ! These potential foreclosures are most often in the sub-prime arena, which means they are owned and serviced by 'Predatory Operations' which identify themselves as "debt collectors" they are not 'Banks' as we know the term.

The seller/owner who is in trouble financially can decide to require that the lender/servicer sign a release or waiver agreeing not to pursue the seller in any way through a 'Deficiency Judgment' or 1099 or the owner/seller's option is not to agree to the 'Short Sale'. At this point the only advantage for the seller could be to remain in the home for as long as possible accruing whatever monies he can to survive. The idea with Short Sale is to avoid foreclosure which would cause the negative reporting to the credit bureau. The Short Sale only becomes a win, even though a sad one, for the seller if, at least, he can salvage his credit even though he looses his home!

Thanks, looking forward to your reply, R.R.

NOV

2007

Stenen,

Sorry I didn't mean to hijack your blog.

Randy, you deserve an answer, I don't think it'll help, but I respond to polite people.

I posted it separately at: Advice From The Sunday Real Estate Section

Bill

PS: You might want to look at: Politically Correct Entitlement

Bill,

I appreciate your insight. No apologies necessary. Thanks,

Steve

JUN

2008

Is it true that a deficiency judgement can be negotiated?

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Steven Leitman

Jacksonville, FL

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Jax Coast Realty, Inc

Address: 252 3rd Street, Neptune Beach, Fl, 32266

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