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Short Sale or Foreclosure which is Better for Seller?

By
Real Estate Agent with Keller Williams Realty Cityside

The question of Short Sale or Foreclosure which is better was a result of by currentt blog on Short Sale "Seller Beware"

In short sale's with deficiency, the bank can refuse to take seller off the hook by retaining the right to file judgement or suie the seller, but on forelosure's, bank can sell the house less than what the seller owed. Can the bank go after a deficiency on a foreclosed home that sold for less? in state of  Georgia, once foreclosed that the end of the story, but will be reported on seller's credit for 7 years. What about other states?

 

Posted by

Jay Badru

Certified REO Specialist

Keller Williams Realty Cityside

Comments (13)

Russ Ravary ~ Metro Detroit Realtor call (248) 310-6239
Real Estate One - Commerce, MI
Michigan homes for sale ~ yesmyrealtor@gmail.com

In Michigan they can go after the defieciency on a foreclosure but no bank has done it in a while

Aug 30, 2008 08:03 AM
Lexi Flournoy
Real Property Options - Los Angeles, CA

The Sellers prime choice should be a short sale.

Aug 30, 2008 08:28 AM
Gregory Lohr
West Columbia, SC

Foreclosures and Bankruptcies are two things you don't want on your credit report.  Sadly, there are a number of ways to save the home, and I say "sadly" because no one (Realtors) seems to want to know about it.

Aug 30, 2008 09:23 AM
Tim and Pam Cash
Crye-Leike (Sango) - Clarksville, TN
Real Estate Professionals - Clarksville TN

I would say short sale, but many times the mortage company makes it almost impossible for those in dire straights to complete a short sale.

Aug 30, 2008 10:25 AM
Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

Gregory,

I agreed with you. We should know better as a professional Realtor's 

Aug 30, 2008 12:40 PM
Cathleen OnullHannigan
Keller Williams Realty - Cary, NC
Cary NC Homes Pro

Well, I still am not getting the answer.  Can the lender file a deficiency judgement if short sale and same for foreclosure?

Aug 30, 2008 02:43 PM
Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

Cathleen,

To answer your question, I do beleive that bank can file deficiency judgement on foreclosure or short sale. They seldom do in Goegia except on a second mortgage and particlularlly equity line of credit. Each state is defferent

Sep 03, 2008 09:13 AM
Stella Barbour
NoVa Brokers LLC - Vienna, VA
Principal Broker, Serving Virginia and Maryland

In Virginia the mortgage company can go after the deficiency.  They will get a judgment and go full force on collection of it.

Sep 03, 2008 03:06 PM
Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

Thank you Stella for sharing your opinion about the great state of Virginia. Like I said before all states are not alike.  

Sep 03, 2008 03:48 PM
Anthony Baldwin
KMT Consulting Group, LLC - Bridgeport, CT

In a short sale, the banks are supposed to accept the short payoff as "paid-in-full" and not pursue the client for a deficency.  You may see some banks attempt to have the seller sign a note saying that they still owe the difference.  They should discuss that sitiuation with their attorney/CPA. 

In foreclosure, the client can always receive a deficency judgement for not defending the foreclosure. 

 

Hope that helps. 

Anthony Baldwin
www.FixYourCreditRightNow.com
www.EarnMoreMoneyFast.com
www.LetUsSaveYourHome.com

 

Sep 04, 2008 12:20 AM
Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

Anthony,

Thanks for your insight. What if there 2nd mortgage is involved

Sep 05, 2008 07:31 AM
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

For the most part, short sale is better for the seller, especially since we have the Mortgage Debt Forgiveness Act of 2007 that gives them even more of a break by not taxing as income the difference between the sales price and what is owed. The seller can also ask the lender for confirmation that once a short sale is approved and concluded, that the lender is satisfied and won't pursue a deficiency judgment against the seller.

A short sale could negatively affect the seller's credit score and drop it to 650. But the seller can immediately start repairing his credit (a credit counselor can certainly give a lot of tips on this). In rare cases, the seller may even be able to qualify to buy another house in 24 months or so.

Yes, a short sale is a tremendous hassle due to the time it takes to close...but it's still a preferred option to foreclosure.

A foreclosure will be on the seller's record for 7-10 years, just as bad as a bankruptcy.

Another option is deed in lieu of foreclosure to dispense with the hassle of foreclosure, eviction, etc.

Sep 05, 2008 08:38 PM
Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

Pacita Dimacali

Well said and thank your for your answer. The Mortgage Debt Forgiveness Act of 2007 is the best verbage to used when asking bank's for short sale approval and confirmation letter of no recourse.

Sep 06, 2008 04:16 AM