Short Sales In Wellington Florida- Why would you or should you sign a soft note to close on your short sale property?
When you are doing a short sale on your property our first goal is to get you a fully satisfied mortgage pay off reported by your lender. That is the best outcome you can hope for.
But this outcome depends on your personal situation and other parts of the process that are not within your control. The more of a true hardship you have the more apt the lender will approve your short sale without any payment from you.
Also, if you have only one loan on your property you are likely going to get a satisfied paid in full without any other considerations.
Most of the time where we see the lender requesting you as the homeowner, the seller to sign a promissory note for part of your deficiency is when you have more than one mortgage on your property and it depends on what you did with the money that you received from your second mortgage or home equity line.
Your credit is checked when you do a short sale. The lender will look at your credit report and try to determine what is going on based on your purchases and such. Here are a few real life examples of lenders asking the homeowner to sign a promissory note.
But first let me define what a promissory note is and how it fits into your short sale. This is for the state of Florida. Please review your own state laws that govern notes. I am not a lawyer and I am not giving legal advise. My thoughts here are for informational purposes only. I strongly urge you to hire an attorney to review your case.
A promissory note in the lingo of lenders is called a 'soft note'. That means you are signing a piece of paper that simply states that you promise to pay back the amount of money stated on this paper. All the notes we have had done were at zero percent interest. This note is not bound with collatoral by any real estate or your home ( if you have another home you are living in, in Florida).
Most of the time the lender only asks for a small portion of the deficiency to be paid back and the payments are very low. You need to put this in perspective to your situation. The first question you need to ask yourself is what did you do with the money that you borrowed on that second loan or equity line? Did you use it to remodel the home you lived in, to buy another home, a down payment on another home or an investment property or for some new toys?
Examples:
One seller took out a home equity line on his house during the boom of real estate when his house appraised for more than what he bought if for. He took out $80,000. He took $50,000 of that and bought a car with it. The lender saw that he bought the car around the same time he took out the loan. The lender asked him to sign a promissory note in the amount of $22,000 with zero percent interest and payments of $261 per month for 84 months.
This seller was excited about this offer by his lender. He realized this was a great deal. Let me explain why. He used $50,000 to buy a new car. He had no payments on his car aside from the mortgage payments since he put the car into his mortgage on his equity line. So here he is getting to walk away from his property that is not worth what he paid for it, he has a new car and is getting a fully satisfied paid in full mortgage reported on his credit report. So now he has to make payments on his car for $261 per month at zero percent interest! Now that is a deal he should jump on and he did.
The next seller took a second mortgage out on their home for $140,000. They used most of that money as a down payment on a new home they were building. The lender asked for a promissory note of $12,000 with payments of $150 at zero percent interest. Now this seller is living in the house he used the money to get, so he is enjoying the benefit and the lender is saying in essence, we want a portion of that money back because you are using the money for benefit. This is only fair, don't you think? That means that he just really bought his house he is living in now for $118,000 less!
The next seller took a second mortgage out to pay his wife's medical bills that were not covered by their health insurance. They are short about $95,000 and the lender wants them to pay back $2,500 on a promissory note. But we told the lender that he does not even have that extra each month to pay. This family will be homeless and therefore there is not another penny due to the ongoing issues of unemployment. The lender finally agreed to not even do any promissory note.
So you see that each situation is different and the outcome is based on many factors. Call Nestor Gasset or Katerina Gasset at 561-753-0135 for more information on selling your home as a short sale in order to avoid foreclosure.
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