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Will I Owe Any Money After Selling My Home As A Short Sale?

posted Aug 30, 2012, 8:39 PM by Jeff simms   [ updated Aug 30, 2012, 8:40 PM ]
I Myself has turned to short sales to get out from under crushing mortgage debt and avoid foreclosure. But some people who’ve sold their home this way have found themselves still on the hook for some of the money they thought they no longer owed.
A short sale is when a mortgage lender allows a homeowner facing serious financial hardship to sell their home for less than what they owe on their mortgage. Generally, the difference between the sale price and what they owe is forgiven. This is not just for the mortage it also can be for you HOA, Water Bill, Tax But more mortgage lenders are going after people who’ve sold their home this way to get the unpaid money.
In some cases lenders never go after the unpaid money, or deficiency. But homeowners going through the short sale process are in some cases being asked to sign promissory notes that they will pay back the money. A woman in the Wall Street Journal article said she was able to pay off her mortgage loan in a short sale, but the lender later came after her for the unpaid balance on a second mortgage. She ended up settling the $21,600 balance for $4,000.
Some experts think mortgage lenders will get more aggressive about going after these unpaid debts as the housing market begins to recover. One real-estate consultant in Florida said that of the 22 short sales she’s completed in the past six months, half of them required borrowers to sign promissory notes or allowed mortgage lenders to retain the right to try to recover the left over debt.

So what should people do when negotiating a short sale to try and minimize the chances of their lender coming after them for the deficiency?
  • Work with a knowledgeable attorney and real estate agent to negotiate a deal.
  • Don’t sign any promissory notes unless they are fully aware of what that means.
  • Check their state’s laws on whether or not a lender can go after a deficiency after short sale. 
  • Talk with their attorney about whether or not bankruptcy should be considered to avoid having to pay the mortgage debt if there’s any chance the mortgage lender will come after them.
If a mortgage lender does decide to pursue unpaid debt, there is always the possibility that they might accept a partial payment as a settlement. In some cases, producing a letter stating that the borrower qualifies for bankruptcy could result in a settlement.