Last week I was surprised to hear of a bank serving a homeowner with a lawsuit for a deficiency balance. I have been selling real estate for 18 years and doing short sales since 2003. My surprise has come with a property that has gone into foreclosure and the bank taking a very aggressive position of suing the homeowner for the deficient balance of the loan. That leads me to answer a question posed to me frequently.
So why a short sale? First, let me explain what a short sale is. The bank holding the lien (there can be 2 banks at times or even 3 banks) is willling to release the lien on the property to enable the homeowner/borrower to sell the property. The liens or loans that are in place are more than the fair market value of the property. In a short sale are you are allowed to sell the property with the banks releasing their interest in the property and the bank then deciding on how to handle the balance owed.
What are banks willing to do in a short sale with the deficient balance once the short sale has transpired? Several options: 1. They place the homeowner in a repayment plan. Usually, the terms are not too bad with low to no interest rates and are usually 15 years long terms. Many times the bank is not asking for the entire deficient balance; 2. depending on the homeowner's particular circumstances the banks are many times willing to forgive the balance but beware that you will be issued a 1099 by the bank for the forgiven balance and this is considered ordinary income by the IRS, so consult an attorney and tax professional for advice and to make the right decision for you. 3. The banks many times will also consider a lump sum settlement in consideration of forgiving the balance.
Whatever your particular situation always consider your options and consequences. Consult a real estate attorney in your state prior to making a decision. Short selling is an option. My opinion is that short selling is always a better option than foreclosure. No one should assume that just because they were foreclosed on that it's over because that may not be the case. The banks in the States of New York and New Jersey are allowed Deficiency Judgments which means they can go after the homeowners for what is owed.
Final word be very careful of individual who will charge upfront fees for loan modifications, short sales or avoiding foreclosures. Never pay anyone a fee upfront fee.
Need more information or help deciding what your options are regarding selling your home in a short sale please do not hesitate to email me at iSellNYNJrealestate@gmail.com or call or text me for me information at 917-291-3335
More information http://money.cnn.com/2012/04/13/real_estate/foreclosures/index.htm