I think the perception of short sales is that the bank is just going to forgive the remaining debt and let a homeowner go on their merry way once the sale closes. They are far more complicated and homeowners need to truly understand what the outcome will be. Remember, a short sale is usually only approved for someone that has no other way to avoid foreclosure!
I have been working with very patient buyers who were set to close today on a short sale. After a tremendous amount of work by everyone involved, the seller is not comfortable signing the document from the lender authorizing the short pay because it states that the remaining debt will be sent to their collection department. The bottom line is that no homeowner is ever going to walk away without paying for what was borrowed in some form, let alone get a lender to put that in writing. This seller has several options, she can sign and never repay the now unsecured debt. The seller can go into foreclosure and let the deficit grow 5x and have the court file a judgment against when all is said and done. Bottom line, I don't care how it is handled but this short sale is the best option to limit the remaining debt for sure.
All I can think about is my poor buyers who are making their first purchase. What could have been done to avoid this situation? What I have learned is that a homeowner facing a short sale needs to understand what the implications will be on the credit and with the unpaid debt. In this case, I only represented the buyer so I do not know what information was given to the seller by the seller's agent. Had I represented the seller, I would have made sure that an attorney and an accountant were consulted and that the seller understood the consequences before I invested my time in marketing a property and negotiating with the bank for a short sale.
Comments(0)