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Short Sale "Seller Beware" Always Ask for Payoff with No Recourse

By
Real Estate Agent with Keller Williams Realty Cityside

Do you always ask the bank on a short sale to issued a payoof statement to your seller without recourse? I do.  I just got a fax from a seller we closed in March 08. The bank want him to sign a promissory note of $40,000.00 on a house they no longer owned. However, while I was requesting the short sale payoff from the Loss Mitigation Specialist, I specifically requested that he signed a no recourse letter that I fax to him on my company letter head. He did and fax back to me which clearly show company name and fax number on the edge of the paper. I kept a copyin the closed file and a copy to my seller at that time.

I fax the signed copy to the bank, and was told that  the Lost Mitigation Specialist is no longer with the company, so the bank had to swallowed the $40k since their employee signed the letter of payoff without recourse. I am not sure if bank agent misplaced the letter or what, but my seller was happy to know there would not be a $40k balance hanging over their head.

Agent's please when doing short sale always request a no recourse letter. The last thing you want is for a seller to tell the world you misrepresent him/her

Happy Selling Rainer's whereever you are. It's going to be alright

Posted by

Jay Badru

Certified REO Specialist

Keller Williams Realty Cityside

Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

To all of you who are confused. If you do short sale's, just because you pay the bank off especially if it's involved a discount which most short sale's are. The bank can come back and ask the seller to pay the difference. Still confused read a copy of your local security deed.

 

Aug 26, 2008 03:58 PM
Scott Comey
RE/MAX Elite - Everett, WA

Good suggestion Jay,

Thanks for the tip.  I see where the confusion is that the other members have though.  Isn't it that the bank files a judgement for the remaining amount after closing, and this letter of "no recourse" would protect your seller from having the judgement filed.  Do I understand this correct?

 

Aug 26, 2008 04:03 PM
Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

Scott Comey,

you are corect

Aug 26, 2008 04:37 PM
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes

Short sales are always a problem to all parties concerned. Good post.

Aug 26, 2008 04:43 PM
Vanessa Calhoun
PalmerHouse Properties & Associates, LLC - Atlanta, GA
Your Greater Atlanta Marketing Guru!!

Hi Jay:

If you don't mind my asking, what lender was this?

Aug 27, 2008 03:20 AM
Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

Hey John mcConnin,

Thank you for enlighting us all on your comment, I cannot say it better. I hope all Realtors start taking this issue serious in short sale transaction's

Aug 27, 2008 09:43 AM
Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

Vanessa,

The lender is one of the big three here in GA

Aug 27, 2008 09:44 AM
Michael Wayne Jackson
Coldwell Banker - Novato, CA
Broker - Seniors Real Estate Specialist Novato

Great post Jay. I was not aware that he lender could do this after the closing.

Aug 27, 2008 10:22 AM
Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

Thank you Mike Jackson,

Yes they "(we)" can, becasue the note on a mortgage deed address it, but it's hidden in small prints so many folks don't read it.

Aug 28, 2008 03:15 AM
Vanessa Calhoun
PalmerHouse Properties & Associates, LLC - Atlanta, GA
Your Greater Atlanta Marketing Guru!!

I finally received a written approval on one of my short sale listings on yesterday and the verbiage on the approval states that the lender agrees to waive their right of a deficiency judgement against my seller. That should take care of it for my seller, right?

Aug 30, 2008 01:38 AM
Patrick Randles
Nova Home Loans - Tucson, AZ

Jay,

What if the lender OKs the short sale but refuses to let the seller of the hook on the deficiency? It seems to me that the bank holds all of the cards and would simply refuse to do this.

Aug 30, 2008 01:45 AM
Anonymous
Vanessa

Yes, once the bank argreed to waive of a deficiency the seller is ok. Be sure is signed by bank official and ask closing Attorney to include deficiancy waiver. good luck

Aug 30, 2008 06:50 AM
#20
Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

Vanessa

Above/below  responce's are  regards to your question

Yes, once the bank argreed to waive of a deficiency the seller is ok. Be sure is signed by bank official and ask closing Attorney to include deficiancy waiver. good luck.

Aug 30, 2008 06:54 AM
Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

 Patrick,

Yes the bank hold all cards in short sale's. If the bank refuses to let the seller of the hook on deficiency, it is the duty of Listing Agent to ask the seller to consult a real estate Attorney that can assist the seller pertaining to loan deficiency.  However, if the bank refused to let seller of the hook, I will simply ask the seller not to close or risk been suie by the bank.

Which lead me to another question to you Patrick. What if the bank foreclosed and sold the property less than what the seller owed, will the bank have any right to go after the seller for deficiency?

In Georgia ("ON MY MIND") I'm not for sure if the bank can go after owner's of foreclosed homes (SOLD LESS THAN MORTGAGE BALANCE). Someone out there can correct me if 'am wrong.

AS far as 'am concerned the seller is not of the hook just because the bank approved a short sales with deficiency. When I represent a seller in short sale with deficinecy, I always ask the bank to issued a no recourse letter. If the bank refuse to issue a no recourse letter, I simply walk away from the transaction. 

That my 2 cents 

Aug 30, 2008 07:23 AM
Lanre-"THE REAL ESTATE FARMER" Folayan
Samson Properties - Bowie, MD
I don't make promises.I deliver results.SOLD HOMES

Jay this is great information. Thanks for sharing. Last thing you want is one of your past clients who can bring you more clients due to your great work ethic doubt why they ever used you as their real estate professional. Great post.

Aug 30, 2008 07:37 AM
Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

Thank You Lanre,

I am glad to be of help.

Happy Se;;ing this fall

Aug 30, 2008 12:33 PM
Evelyn Johnston
Friends & Neighbors Real Estate - Elkhart, IN
The People You Know, Like and Trust!

Can you bless us with a posting of this no recorse letter so we have an idea what to say in it?  We would all appreciate it and benifit from seeing it.  Thank you so much!

Oct 08, 2008 02:08 AM
Brenda Harmon
Century 21 Beal, Inc College Station, Texas - College Station, TX

Jay,

Good post but I agree with John.  Let an attorney look it over to keep everyone out of hot water.

Oct 09, 2008 05:53 PM
Keith Manson
First Weber Group/short sale/cdpe/gri - Muskego, WI

I agree that it is a good thing to have a attorney to review and approve a release.  The question that gets opened up is where the banks are foreclosing with out defficency rights ( no judisical foreclosure) and try to enforce a deficiency on the mortgagor.  After everything is worked out with this back log of foreclsoures, it will be interesting to see what the banks do.

Oct 10, 2008 12:01 AM
Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

Brenda: it's always better to let the Attorney's do their jobs. thanks for your comment

Keith: don;t forget most of these loans are insured. I thought banks will sinply collect thei losses from insurance and label the buyer they foreclosed on as bad eggs for the next 7 years. Could be wrong, but thanks for your comment

Oct 10, 2008 05:24 AM