Short Sale Before Bankruptcy? .. Something to Consider

Real Estate Agent with Allison James Estates & Homes, Sarasota 941-957-3737

As a Short Sale Real Estate Broker with Keller Williams Realty in Sarasota, Florida my Team ( specializes in representing sellers facing foreclosure to complete a Short Sale.  Our Team has handled over 100 bank-negotiated sales in the Sarasota, Florida real estate market in less than a year.  With approximately 70% of the Real Estate Sales in our Multiple Listing Service being Bank-Owned or Short Sales in the Sarasota, FL marketplace, we are extremely busy. 

Recently we obtained a conditional, Short Sale Approval on one of our listings, where the seller's lender expected the seller to sign a promissory note for the full amount of the deficiency, in order to complete the Short Sale.  We tried to negotiate with the lender and the lender would not negotiate.   Given the amount of the potential liability, the homeowner concluded that bankruptcy was his only option and he contacted an attorney.   The attorney advised my homeowner to "Compete the Short Sale and pursue a Bankruptcy later, if necessary", for the following Reasons:

 1 .  The homeowner would avoid a Foreclosure without any expense as we already had a conditional approval on the Short Sale of his property.   Yes, a bankruptcy could prevent the liability of a future deficiency notice, however it would not stop the property from going into foreclosure, on a house the homeowner no longer wanted to own.   Because a Foreclosure carries its own set of negative consequences, the attorney advised my homeowner to avoid foreclosure, if it can be avoided.   

2.    Because of the homeowner's particular situation, the seller would not have any tax liability from the sale of his home as a Short Sale.    

3.   Why should the homeowner agree to a Promissory Note?  The attorney responded with, "Because it a process to complete the Short Sale".  After the Short Sale, the Promissory Note is not secured by real estate and could potentially be negotiated down at a later date and if necessary, could be wiped out with a Bankruptcy.  Bankruptcy should be your last option and should only be considered after all other possibilities are exhausted. 

Of course every situation is different and I am not an attorney nor am I giving legal advice.   For legal questions, contact an attorney.  For accounting information contact a CPA.   For more information on Short Sales, visit my site 



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For more information on Short Sales in Sarasota and Foreclosures in Sarasota, please CONTACT USWe have over 25 years experience in real estate, and have been highly successful in negotiating short sales in Sarasota County & Manatee County, Florida.

Troy Funk, CDPE, SFR
Sarasota Certified Distressed Property Expert
Sarasota Short Sales & Foreclosures Resource
Florida Licensed Real Estate Agent

Allison James Estates & Homes
665 S. Orange Ave. #2
Sarasota, FL 34236
(941) 365-8769

WATCH this Sarasota Short Sale Testimonial Video


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  1. Sherilyn M. Whistler 11/20/2010 08:55 AM
ActiveRain Community
Florida Sarasota County Sarasota
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Indera Coggins
Re/Max 100 - Dunkirk, MD

Troy, great information above. I just settled one one with a promisary note. Unfortunatley, if the seller cannot fulfil that promise, bankruptcy is next and will ruin their credit.

Nov 18, 2010 07:11 AM #1
Sherilyn M. Whistler
ERA Herman Group Real Estate-NoCo - Loveland, CO
Need a Referral, Call Me !

Thank you for confirming what I had already suspected.. I have a client who is filing BK and I told him to make sure his home was short sold first, NOT after...

Nov 18, 2010 11:18 AM #2
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert


Very important post. Many homeowners think that if they file BK the house magically goes away. They don't realize it gets foreclosed upon anyway.

Nov 19, 2010 02:10 AM #3
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Troy Funk

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