Deficiency Judgments and Short Sales in Florida

I have received a couple of questions after our Short Sale seminar and thought it would be valuable to share those questions and my responses with you.  Here's one from an agent regarding deficiency judgments and short sales:

Question:  "Is the seller of a property in a short sale still subject to liability for a deficiency judgment?"

Answer:  It depends.  Sorry about that; but it does.  Let's dig a bit more deeply before we conclude on anything.  I will try my best to incorporate business improvement strategies into the responses when it is appropriate.  This question presents that opportunity.

First things first, from where would a deficiency judgment arise in a short sale scenario (that is, when the lender has accepted less than it is owed in exchange for a release and satisfaction of mortgage that encumbers the real property)?  A deficiency judgment could arise from the enforcement of the Note.  The Note, as you are aware, is the personal promise to repay to the lender the sums borrowed.  It is, in essence, back up security for the lender should the sale of the real property collateralized in the Mortgage fail to net enough to satisfy that Mortgage.  When such a deficiency exists, the lender has a few options:

1.  The lender may agree to cancel the debt.
2. The lender may agree to cancel some portion of the debt and demand the repayment of the rest.
3. The lender may demand repayment of 100% of the deficiency.

While there is no crystal ball for sellers or the agents listing their properties to determine which of the above options a lender will choose, understanding the options can be of tremendous value when communicating with your clients.  I will discuss the value in this knowledge in future emails and blog entries.  Stay tuned and don't hesitate to call or email should you have questions you'd like addressed.  And please know that the identity of anyone asking questions will remain confidential during any public/online discussion.

 Contact us today to find out more about our Short Sale Services Suite.  Helping listing agents close more short sales more often. 

NOT LEGAL ADVICE:  This information is not to be construed as legal advice. Legal advice must be tailored to the specific circumstances of each case. Every effort has been made to assure that this information is up-to-date as of the date of publication. It is not intended to be a full and exhaustive explanation of the law in any area. This information is not intended as legal advice and may not be used as legal advice. It should not be used to replace the advice of your own legal counsel