Will I owe the bank /Lender money after a short sale?

 Will I owe the bank /Lender  money after a Short Sale?

 (also known as a deficiency judgment)? This is the most asked question and it has a multi-part answer.

If the home is your primary residence and you're still living in it, this is the best position to be in and usually results in no contribution from you. Yet even with a primary residence, there is no guarantee that you won't be asked to contribute. Why? There are a couple of reasons this happens in a Short Sale:

A - you may show that you have enough money in your bank accounts to "afford" to contribute something to offset the bank's loss. Here's an example; you're upside down on your home, have a valid hardship and the bank is willing to take a loss of $100,000 or more. They agree not to pursue you for this loss, but would like you to contribute $5,000 - $10,000 at closing.

Your first reaction may be "Forget it. I can't afford that! Let them foreclose. I know lots of people who didn't pay anything!" That's one option and it's ultimately your choice. Remember, the point of a short sale is for you to regain control of the situation. Here's the bigger picture, though. If you let the home foreclose, the bank can file a judgment against you for the full loss plus attorney's fees, repairs, marketing, real estate commissions, property taxes, HOA delinquencies, etc. 

If you have a first and second mortgage, the first lienholder has six months to file and the second has six years. It's hard enough to hold your breath for six months to see if they'll file, but six years? Then the banks sell the judgment to a collection agency and you're hounded forever. Then you'll have to consider if bankruptcy is the right way to go to release the judgment - which is a whole new subject and you'll have to pay for the bankruptcy lawyer, if you qualify for a bankruptcy. That $5,000 contribution starts to look like an appealing option.

When the banks ask for a contribution, they usually will give you two options - pay them a lump sum at closing or you can sign a promissory note for small payments over a set amount of time (usually 5 years at 0% interest.)

B - the other reason you're asked to contribute is because your loan had mortgage insurance on it. Mortgage insurance is a topic for another column but essentially you may be asked to contribute as well.

IF you're asked to sign a promissory note (it's my goal when negotiating with the lenders to have no contribution from you and I'm successful almost 100% of the time) - then you're turning a secured debt of $100,000+ into an unsecured debt of $5,000 - $10,000 with a payment of perhaps $100 - $200/month for 5 years.

The bottom line is that you'll be free to move on without a huge liability to follow you and no foreclosure on your record. These are definite advantages to agreeing to contribute but I'll reiterate, this is the exception, not the norm and each short sale is different.

 at your service,

Sidney Kutchuk  AKA...Cyber Sid
      SHORT SALE AGENT
   CALL ME, 951.215-6745
http://breakingtemeculanews.com

Sidney@RealtyWrks.com  visit my site at > www.aShortSale.com

40150 Winchester Rd #1  Temecula Calif. 92591      Fax 951.676-5681