Bank of America Short Sale Letters - Deficiency vs. Non-Deficiency
If you are considering a short sale, or in the process of completing a short sale with Bank of America, you need to be aware of the two variations of the short sale approval letter they use. Not understanding the letter or having someone negotiate the short sale that doesn’t understand how to negotiate with Bank of America could potentially cost you thousands (or hundreds of thousands depending on your loan amount). The two letters they issue are very similar expect for one paragraph that either allows them the right to come back and collect the remaining balance OR guarantees that the remaining balance will be written off.
The standard letter they will issue is their “Deficiency Letter”. Here is a sample of the letter:
Bank of America Short Sale Approval Letter With Deficiency
This letter allows them to keep the right to collect open. The verbiage in the letter is:
BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment received 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. Furthermore, there may be tax consequences associated with entering into a short sale. The seller is encouraged to seek guidance from an independent tax advisor, and/or an attorney, before proceeding with the short sale.
The letter you want is the “Non-Deficiency” letter. Here is a sample of the letter:
Bank of America Short Sale Approval Non-Deficiency
This letter puts in writing that the remaining balance of your loan will be written off upon completion of the short sale. The verbiage of the letter reads:
Upon receipt of the agreed amount, BAC Home Loans Servicing, LP, and/or its investors will waive the remaining balance due on the above referenced loan and release the borrower from further obligation therein, and waive all rights to pursue further judgment or deficiency. BAC Home Loans Servicing, LP will report the debt as "settled for less than the amount owed" and issue a 1099 for the remaining balance. The seller is encouraged to seek guidance from an independent tax advisor, and/or an attorney, before proceeding with the short sale.
You can read further information on Bank of America Short Sales from our website. If you are facing foreclosure or have any questions regarding a short sale and the foreclosure process, please do not hesitate to contact our team. We specialize in San Diego Short Sales, Orange County Short Sales and Riverside Short Sales.
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