Short Sale Blowup - BOA Says NO

By
Real Estate Agent with Excellent Service Realty

Well it has been a common scenario that the banks will forgive a deficiency...until now. I recently got an approval for a short sale from Bank Of America and the Short Sale Approval Letter which said:  " XXXX and or it's investors may pursue a deficiency judgement for the difference in the payment recieved and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above. In addition, if this loan is covered by mortgage insurance, the mortgage insurance company may reserve the right to pursue the seller for the deficiency based on the terms of the mortgage insurance policy."

Another Realtor who does a lot of short sales in my office said this was the first he has heard of this happening. After reading this approval letter, my sellers decided to withdraw their offer to short sale and I took their house off the market. Their options were short sale and have the possibility of a deficiency judgement or foreclose and have one as well. They did not qualify for a loan mod. I counseled them to seek the advice of an a good short sale and bankruptcy attorney.

With everything tightening up, it's getting harder and harder to close on short sales. Can I get an AMEN ?

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Topic:
ActiveRain Community
Location:
Florida Pinellas County
Tags:
bank of america
short sale
deficiency judgement

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Rainer
106,855
Jason Koivu - SFR Certified Realtor Brevard County, Florida
Serving Brevard Realty - Viera, FL

Barry - There was some chatter a day or two ago about the same topic over here on the Space Coast of Florida.  It really does not truly behoove the banks to proceed with a short sale.  People keep talking about how they would want to get out of the situation and have the asset deliver a revenue stream but I disagree.  If the bank can write off the mortgage as bad debt and offset taxes and then sell the home for whatever price they choose to create a chunk of cash - wouldn't it be smarter for them to foreclose???  What makes more sense - having $1500 a month coming in on reselling the home or dumping the asset and walking away with $125,000 (or - you get the point . . .)

Feb 17, 2010 02:16 PM #1
Rainer
13,007
Barry Smith
Excellent Service Realty - Saint Petersburg, FL

It has been proven that banks make less money after it goes to foreclosure. Homes that sit vacant deteriorate. I might also add that this wasn't a fire sale. The contract price was about $20k lower than market value....but the deficiency difference is about $100k...which the bank could never recoup by selling it on their own.

Feb 17, 2010 02:24 PM #2
Rainer
142,933
Ben Benita
Ben Benita - Gainesville, VA
Speaker, Author, Game Changer, Coach

Losses -- Generally true unless mortgage insurance is in place...in SOME cases, the ivnestor on teh note actually makes MUCH more money via foreclsoure (that is why you should ALWAYS ask if mortgage insurance exists).  Regarding a short sale versus foreclosure, it is case by case, BUT, short sales tend to have less impact on credit.....again, it is case by case.

Also, keep in mind the investor MUST pay the Servicoer (who the owner writes his/her mrotgage check to) each month to service the note REGARDLESS of whether or not the Seller is making payments

E-mail me at bbenita@comcast.net and I will send you what we give our clients comparing short sale versus foreclosure.

All my best to you.

SIncerely,

Ben Benita, Expert Short Sales Negotiator, www.United-IG.com

Feb 17, 2010 06:05 PM #3
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Rainer
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Barry Smith

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