LENDERS GOING AFTER YOUR ASSETS AFTER A SHORT-SALE

Shiela- My post for my outside blog today was about the possibility of a Deficiency Judgment in the State of CA.

How timely.

Sorry for the link but I have to run and wanted to get you an answer.  It's quite simple for us Californians.

http://suburban-renewal.com/confessions/?p=52

 

Sheila,

Don't know about California, but in Utah if the seller is able to negotiate a "short sale" with the lender in lieu of foreclosure, the lender can file a Deficiency Judgment against the seller.  The judgment must be filed within 30 days of the release of lien and attaches to the seller's personal assets.  It may be worth the extra money for your client to hire an attorney that can help to protect his assets as well as negotiate with the lender to not file the Deficiency Judgment.  Some real estate agents that specialize in short sales have also been able to negotiate so that no judgment is filed.  If you are new to the process I would advise the attorney route.

Sometime they ask for a promissory note or other agreement to repay the short amount.  An experienced short sale specialist will ask the bank to agree to settle it "Paid As Agreed".   They should also consult their tax man about any tax implications for the amount short.  Sometimes it is considered gain and is taxable.  They don't want a painful surprise next year at tax time.

That is a very interesting topic!  I will follow this blog to see the responses!

Currently working on a short sale we are going through similar group of questions.

If a bank accepts a short sale my understanding they are saying Paid in full. One question has come up, What about income property? Not sure. In my case my client purchase a 3 rd home (the bought way down) before their credit goes south.

I've also have heard that the HELOC can come back after and try to collect and taxes may be due on home that are personal residence. I think my client will end up having to do bankrupcy but we are try to avoid it with these short sales.

The problem is to see if the bank will accept the short on both the previous 900K home and the 250k income home and not be thrown by the 230k home the presently live in.

 Ralph

Ralph

Great info. Thanks I will also follow this blog. I hope all turn out well.

I know that prior to this year homeowners who did a short got taxed on the forgiven amount as it was treated like income. The law has now changed on single family residences as the forgiven debt is not classified as income.

Most banks do not go after a customer that ends up in a short sell. It is to expensive for one thing, the other is if the customer was so desperate to get out of their loan/house then chances are they don't have a whole lot of money. Work with an experienced attorney on it! Good luck!

Hello Shiela,

Here is your answer> Good luck with your Short Sale and if you need additional information please contact me Thank you!

Residential 1 - 4 units, Owner Intends to Occupy a Unit in the Secured Real Property	Other Real Property
Lender Purchase Money Loan ▼	Seller Financed Purchase Money Loan ▼	Refinance (Non-Purchase Money Loan) ▼	Lender Purchase Money Loan ▼	Seller Financed Purchase Money Loan ▼	Refinance (Non-Purchase Money Loan) ▼
NO deficiency judgment if senior or junior lienholder* Cal. Code Civ. Proc. § 580b	NO deficiency judgment if senior or junior lienholder* Cal. Code Civ. Proc. § 580b	YES deficiency judgment if judicial foreclosure NO deficiency judgment if trustee's sale foreclosure Cal. Code Civ. Proc. § 580d	YES deficiency judgment if judicial foreclosure NO deficiency judgment if trustee's sale foreclosure Cal. Code Civ. Proc. § 580d	NO deficiency judgment if senior or junior lienholder* Cal. Code Civ. Proc.  § 580b	YES deficiency judgment if judicial foreclosure NO deficiency judgment if trustee's sale foreclosure Cal. Code Civ. Proc. § 580d