Short Sales

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In view of the potential of a deficiency judgment, we usually encourage borrowers to first explore the short sale process.   The most important factor, of course, is the explicit release of future liability.  This must be negotiated in advance, however.  Do NOT just take a realtor’s word for it that “everything is OK.”   If the lender is unwilling to play ball, there may be no alternative to litigation.  We often find that the lender will agree to the release as a factor in settlement of the litigation, where the loss mitigation department was otherwise unwilling to make the concession.

Many times a bank will release the borrower completely, depending upon the assets and financial position of the borrower as a reward for bringing a buyer. In other instances the bank will negotiate an agreed amount which most often is a deeply discounted sum settling for cents on the dollar in the form of a newly executed promissory note.  A short sale is an excellent solution for the borrower provided the deficiency waiver is obtained. Litigation may or may not be necessary to achieve the desired result.  Walking away from the problem by allowing the property to simply be foreclosed upon can open the door to a deficiency judgment for the entire amount. This behavior becomes a game of Russian roulette which is only acceptable if the buyer has no assets, in which case, who cares?