Posted by: Catherine | March 12, 2009

Are you aware of how a short sale may hurt you in the future?


Sure, this sounds opposite of what many realtors may say. But it’s the truth. A short sale is not always the right answer. Be sure you connect with a good attorney from the beginning. Be sure you will be protected down the line. In California, there are some very specific protections for homeowners with your original (first) loan on the property. They call that a “purchase money” loan in California, if it’s your primary residence, it may be considered NON RECOURSE. That means in a foreclosure, the lender can NOT go after you for any further remedies, damages or deficiency. HOWEVER, tucked away into many of these short sale letters of “approval” is language that potentially change that for you. Some of the worst offenders have language such as that you will be liable for the deficiency. Or that they MAY reserve the right to pursue you for the deficiency balance. The most blatant language is from Bank of America that says very plainly that if you do move forward with the short sale, YOU ARE turning the remaining amount owed into a “collectable balance” and you will be forwarded to collections. So are you turning your “non recourse” debt into a collections? Possibly. Do you know what you are agreeing to when you complete a short sale and sign off on their approval? You better…

The worst offenders:

1. Bank of America
2. Countrywide


Responses

  1. […] Can A Short Sale Hurt You? (its not always the right answer for all) […]

  2. Wachovia is now requiring you sign a letter for the balance too.

    • Actually here locally Wachovia is consistently waiving that requirement. You just have to know to ask them to, as it will sometimes come standard in their letter. But their own reps tell us here (not sure where you are) that they will not stop a short sale over this issue and will remove the language and have in every case I’ve been involved with. Good luck.


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