Everyone in real estate knows that we are the Short Sale Kings. While there maybe some pretenders to the throne, they are just wannabees seeking to find refuge riding upon our coattails.
I mean we don’t mean to be cocky but it’s nice being THE SOURCE for Short Sale information. Well I guess that sounds a little cocky but so what, it’s true.
BIG UPDATE: March 27, 2010: After tons of comments and privately sent emails we felt that this subject deserved more than an article. So we decided to do a complete radio show episode about deficiency judgments. And to kick it up a notch even further, we made it the first installment of Real Estate Radio USA TV…yep it’s a video on the subject that covers deficiency judgments in GREAT detail. To view the video, click on the image below…but make sure you get some background and read the article and comments below.
CLICK THE IMAGE ABOVE TO WATCH THE VIDEO
We teach and execute short sales and it always amazes me..still…in now 2009, in the midst of arguably the best real estate market EVER, how many agents out there are still being fed bad information.
I get emails from around the Country from agents asking themselves ..HUH..after reading something on this website or that website. Heck, one could make one heck of a living just straightening out the misinformation being spewed on Active Rain, that is of course if people on Active Rain would actually PAY for their professional education.
Ok, maybe that was a cheap shot, I am sure there are quite a few agents on Active Rain who take their profession seriously and have paid and educated themselves to be proficient short sale executors. I just wish they would actually speak out when they see bad stuff being said and corrected the misinformed poster.
But I guess actually telling someone that they’re full of crap on Active Rain goes against house rules. So everyone exists in a Delos-like, Utopian West World where you’re ok and I’m ok, and Mary Poppins is always singing on some Austrian hillside.
Yikes..excuse me while I throw up!
Recently, a real estate agent posted some drivel trying to explain the issuance of a 1099 in a short sale. I will admit, it was one of the better attempts I have seen on Active Rain by someone trying to explain this but it fell a bit short. It was a “nice post” but a bit technically wrong.
As I am one half of the Dynamic Duo known as the Short Sale Kings, The mighty Sultan of Short Sales, let me take a moment to set things straight. Maybe…just maybe, there is one agent out there who gives a crap enough to actually want to learn this.
So while I am waiting for my blueberry muffins to cool, let me address this.
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There is no such thing as a deficiency on a short sale. We find realtors ALWAYS miss this. Or get terms interchanged.
Forgiveness of Debt and a deficiency are two separate and distinct situations and the terms do not mean the same thing whatsoever and the distinction is VERY..VERY..important.
A short sale is a negotiated settlement, short payoff on a mortgage. PAYOFF. When a short sale is completed, the bank issues a SATISFACTION of the mortgage AND RELEASES the borrower from all obligation. Once a Satisfaction of Mortgage is filed and the Release of Mortgage is obtained, there is NOTHING from which a deficiency JUDGMENT can be obtained. The mortgage has been SATISFIED and the Borrower RELEASED.
In this instance a homeowner may get a 1099 and may be liable for taxes on the debt which was forgiven.
However, if a home is actually foreclosed, and the bank sells the home as a REO and they sell it for less than what is owed, then the bank, in certain states, can obtain a deficiency judgment for the balance. In Florida it’s actually written in the Final Summary Judgment of Foreclosure.
Now here’s the big difference MOST realtors don’t grasp and have a problem relaying to their clients.
Let’s say that the mortgage balance with fees and costs is $300,000. The short sale is completed on the house for $200,000. The amount of debt forgiven is $100.000.00. The 1099 , if issued, would be for $100,000.00. Does this mean the homeowner owes the IRS $100,000.00..NO OF COURSE NOT!!
This is treated as ordinary income in most cases and the homeowner would have to pay taxes on this new found “income” according to their tax rate. Let’s say they are in a 33% tax bracket…then they would owe the IRS $33,000 theoretically…I say theoretically because there are a NUMBER of maneuvers and strategies that any half decent accountant can do to reduce this IRS debt.
Now..on the other hand…the same house is actually foreclosed on by the bank. Same $300,000 outstanding debt, same price on re-sale of $200,000.00 ..now the bank has what is termed a deficiency of $100,000.00. Based upon their Final Summary Judgment ins some states, they can simply go back to Court and they are entitled to a DEFICIENCY JUDGMENT for the ENTIRE $100,000.00!!
So as you can see…there is a HUGE difference here. By the way..check with your state, but here in Florida, this judgment, once certified, has a potential lifespan of twenty years and will continue to grow as statutory interest is applied and compounded while not being paid.
Other than bankruptcy and expiration this $100,000 judgment will continue to grow and grow over the years.
So when talking to a homeowner which situation is better to be in.
Real estate agents need to know the difference. There is a HUGE difference.
My muffins have cooled and you are now schooled..for free! You’re most welcome!
UPDATE: We have been getting tons of comments and emails regarding this entire issue and we think we understand the problem many of our readers are having.
We have been writing from a point and perspective of “obviousness”. You see whenever we do a short sale it is obvious to me that I want clear and marketable title so that I can re-sell the property for a profit. So in that essence there can’t be any mortgages or liens on the property so we ensure that the mortgages in a short sale are satisfied and released.
As a part of our due diligence and promise to the Seller, we also make sure that he or she are also “released ” from the mortgage when the short sale is finalized. It is now apparent that many homeowners are getting screwed because they are dealing with real estate agents who:
1. Have no idea what they are doing
2. Have outsourced the file to someone else who doesn’t know what they are doing
3. Could care less what happens to the homeowner as long as they get paid.
That’s the only way I could explain the incompetence of an agent who advises a client to go through with a short sale transaction WITHOUT the payoff of the mortgage in default along with a release and satisfaction. Anything short of that in my opinion is malpractice and simply wrong.
Please make sure that your agent doesn’t screw up your short sale. Trust me, once they have their commission they won’t be back to help you when you find out that they did not obtain a full release for you. In that event you could indeed be left holding the proverbial bag.
I just could not even comprehend that someone would treat a client in that regard.
Sign up for our Short Sale Video Course so you can truly be educated as to the nuances of a short sale. You might find yourself making a few bucks! Now available on DVD!
Florida Deficiency Judgments – What is Fair Market Value …What is fair market value in determining a deficiency judgment by Sackrin & Tolchinsky, South Florida Lawyers since 1982.
State sues three Miami foreclosure rescue firms
Sun-Sentinel.com, on Tue, 22 Dec 2009 – A deficiency judgment? Naaah. Probably big fat bonuses for all! Hurray! While I do allow a personal exemption for house-flippers or speculators inspired by …
You can regain credit to buy a home
Appeal-Democrat, on Fri, 18 Dec 2009-In some states, the lender still may come after you for a “deficiency judgment” if he or she can’t get enough money when the house finally is sold. …
Deficiency judgment rule, not exception – Business … When the mortgage foreclosure sale has occurred and the bank takes the property back, what are the consequences for a borrower as far as personal liability when the foreclosure judgment amount exceeds the fair market value of the …
NP Barry, I still have some time but just trying to be ahead of the game.
The ones on that link are for California, and the guy who sent me the link said these letters may vary by jurisdiction. Also I tried to confirm with my agent about whether my loan servicer is ASC or Wells, he said he thinks it’s ASC, but will confirm. I checked through all of the paperwork sent to me and they all have the Wells Fargo letterhead, none that says ASC dba Wells Fargo!??? I also asked if he has seen Wells Fargo approval letters and he said yes, and they clearly state fully
satisfied and released. He also said that I should not sign if it doesnt say what I want.
(Sorry bout the double post, hit submit too quick)
You definitely want satisfied and released. We’re working on a deal with ASC right now..not bad..but gotta stay all over them.
So what did you say was the difference between ASC and Wells Fargo?
When you mentioned you were dealing with Wells I was just making sure you knew who you were probably dealing with being ASC not Wells…
Hi Barry,
My shortsale finally got approved and I should be getting the approval letters any minute now. Please let me know if you have a recommendation for an experienced attorney in Las Vegas who can review these letters. Thanks!
Elle,
Please share when you get your letter. I am a couple weeks behind you.
Thanks…
Hi Elle and congratulations! Sorry I dropped the ball. I will make it my mission to find someone to take a look for you tomorrow.
Guys,
Is this pretty clear or what:
Wells Fargo Bank, N A approves the sale of the above referenced property. This sale will result in a short payoff of the mortgage, and the mortgagor(s) acknowledge they waive any and all rights to any escrow balance, insurance proceeds or refunds from prepaid expenses. Neither the mortgagor nor any other party may receive any sale proceeds or any funds as a result of this transaction except as noted in this Demand Statement. As agreed, when we receive the sale proceeds and all required documentation, we will notify the credit bureau to reflect “agreed settlement short of full payment” which would appear on the credit report within 60-90 days from the sale date and within 60-90 days from the date of notification and waive any deficiency rights, if applicable.
Elle Congratulations!!
Looks like you won’t need an attorney to review that. Pretty straight forward! Now when you get the satisfaction filed in about 30-60 days you should see it as Satisfaction in full which we are seeing from Wells.
And for the naysayers out there who moan about deficiency judgments, the statement that says as follows… “agreed settlement short of full payment” … indicates a SETTLEMENT of the lawsuit and there can be no deficiency judgment because it has been SETTLED and since it did not go to auction and the bank agreed to accept a loss there is no deficiency judgment to come after Elle on. Now the 1099 issue is another subject but if this is Elle’s personal residence then it’s all good there as well.
Again…congratulations Elle!
Wow you really think I don’t need an attorney? This is not my primary residence, it is a rental, and the second lien did not explicitly have the language in their conditional approval letter. Their final letter will not be issued until the end of the process so I have to wait. Now I have to wait and hope that the buyer follows through.
I do have a few questions, what is the sellers concessions? I am asked to pay a brokers fee and a hoa package, but the approval letter lists some reserved money for hoa and sellers concessions, but my agent said (before seeing the letter) I needed to pay for the 2 out of pocket. Is this right?
Not your principal residence? Hmmm…bummer..then you MAY be liable for the 1099 the bank will issue. May need a good accountant. Need someone to have you determine if a IRS 982 will help you.
Seller concessions is basically a fee or credit that the Buyer must have asked for in their offer. It usually goes to assist in closing costs or repairs.
If someone is telling you that you have to pay for something out of pocket then you moist assuredly need an attorney. I am wrong and it seems the sharks are circling and trying to screw you. I hate that shit when Realtors who are supposed to be looking out for your best interests pull this friggin crap!
Time to get ya a big dawg to kick some ass. Check your email, I have a question for you,
Barry are u referring to filing for insolvency because that was my plan. Everything that I own does not come close to how much I owe for this property. Is that how insolvency is proven
UGH!!! So now my buyer is acting up. I got my lender to approve and all and now, we are waiting for the buyer to decide on what loan to go with, but they have basically sat on it for 10 days. He now has approximately 20 days to close still, but this is so frustrating. What would be your suggestions on what to do right now? My realtor and the buyer’s realtor are on the buyer’s case, but the buyer and the lender seems to be unresponsive.
This is why we ONLY deal with cash buyers. We never run into this because as you can see from out site, we only recommend dealing with the right kind of buyer…the ones with cash!
As for your predicament…what does your contract say? You are at this point bound by its terms. The buyer only has to perform as per the terms of your contract. I would make sure everything is bulletproof in the contract and find out what your moves are based upon the contract that you signed.
Sold my property in March under Short Sale and have a Release of Mortgage, now the bank for the second mortgage to the property (Equity Line) is threatening us constantly with the notion of a deficiency balance due them. They say if we don’t pay they will file suit against us. My husband and I understand that since the property went through short sale and there was a Payoff to them which they agreed to which provided for a Release of Mortgage, the case is closed. After reading your article on Deficiency Judgements I believe this even more. Now, I went through the closing docs and there is a stipulation in there that states: ” Liabilities of deficiency balance to be determined.” Can they use this in their favor against us under this short sale that was completed?
Hi Tina…this is a common trick. Print out the satisfaction or release that was filed by your second mortgage lender. Read it carefully and let me know exactly what is says in terms of what was released or satisfied. Also, who is calling you? The same mortgage company or a collection agency? If it’s a collection agency I can help you deal with them after you find out the wording on the release.
Start there and get back to me. I’d love to help you rid yourself of these leeches!
Thank you so much Barry for your prompt response and your desire to help us all
I just notice that the Release of Mortgage is from the Original Mortgagee (first mortgage only) it states that it does hereby release from operation only the referenced mortgage (which is the first), without relinquishing right of debt under terms of an unpaid note… It sounds like they are releasing the property but holding the note in effect. If that’s the case whoever negotiated your short sale screwed up and may have misrepresented to you. I have been telling people that lawsuits might be coming and this could be one of those instances…without seeing the actual release of mortgage it’s hard to tell. I think it’s time that you seek out the advice of an attorney as you may have grounds for suit if you were told otherwise.
But at the closing there was a settlement statement reflecting a payoff to the second mortgage which I have described in its exact words for you below. There may have been a payoff but you need to see an actual release. Maybe they have not filed it yet (how long ago was the closing?) but you need to get a copy. It’s time to make the agent and title company who handled things for you earn their money and get it taken care of. You may find some reluctance now that they have pocketed their commissions and fees and that’s where your attorney needs to step in…unfortunately.
My question is… how is it that there is only a Release of Mortgage from the first Mortgage and not the second when in the closing we were served a document (which I rewrote for you below) that indicated the bank upon receipt of the funds would release the lien? How is it possible that the house was sold if the second mortgage did not release the lien when they received the payoff statement? The letter was from which mortgage? You see there MUST have been a second letter. There would be no closing without the second mortgage ALSO sending an approval letter. So trust me…somebody has the second letter. It’s in the file or there would have been no closing. Get that second letter!
The Settlement Statement on closing says: Payoff of second mortgage loan to (name of bank). This appears in box #505.
An additional form that they had us sign at closing states:
(NAME OF BANK)
Re: Short Sale on the Equity Line of Credit
Account No.
Account Balance:
Property Address:
In response to your request, please be advised that (name of bank), has agreed to the following short sale. The (name of bank) has agreed to accept the amount of no less than $5,000.00 will come from the proceeds of sale on the subject property. Upon receipt of the funds the bank will release the lien. the deficiency balance will be reported to the credit bureaus as “Charge Off” collectable balance. Liabilities for the deficiency balance to be determined (this last sentence appears in bold letters).
This offer is contingent upon the following conditions being met.
1. That the borrower (our names) sells the property.
2. With no proceeds going to the seller (our names).
3. Borrower is aware that the liabilities for the deficiency balance are to be determined. (this line appears in bold letters and is underlined).
4. Lien Release to be prepared by the closing: Attorney, title or Escrow Company; forwarding the document together wit the Short Sale check to (name of bank), for notarizing and recording. (This line also appears in bold letters).
5. This offer is Null and Void after (date exactly one month after closing) and is subject to increase.
6. This is contingent on this document being signed and retured to (name of home retention division recovery analyst) prior to closing. (This line underlined).
7. Borrower understands that any excess funds will be sent to (name of bank) and applied to outstanding balance of the loan.
The Bank may be required by law to report this transaction to one or more taxing authorities. The Bank makes no representations about any tax consequences this transactions may have or any requirements, which may be imposed, on the Bank. You should consult an independent tax counsel of your own choosing if you desire advice about any tax consequences, which may result from this transaction.
Remit the payment to: (name of bank)
Attention: (name of home retention division recovery analyst)
Mail Code :
Sincerely; (name of home retention division recovery analyst) (Here appears Notary stamp) Acknowledged By:___(our names)________________
Acknowledged By:___ (our names)________________
Here is the key clause in that letter: ” Upon receipt of the funds the bank will release the lien. the deficiency balance will be reported to the credit bureaus as “Charge Off” collectable balance” This means that the bank is releasing the property so the sale can be facilitated, but declaring the balance as bad debt so that they can “charge it off”. Either on their taxes or as a claim on any PMI they may have had. This is NOT a deficiency judgment, as their is no lawsuit. However they want to be able to come after you for the shortfall beyond the $5,000.00. This to me is a bad case of short sale representation. But here’s the good news. Wait until you actually get the satisfaction in hand (or recorded document evidencing the release) Often times the wording is to your advantage. I can’t tell you to do this but I can tell you what I would do. I would wait until I saw the recorded document and in the interim I would go see an attorney and if I received any calls from anyone trying to collect on said shortfall balance I would refer them to my attorney. You really won’t know what direction to go in until that document is recorded. In the interim, get your ducks in a row. Can you see an attorney?
Hi Tina…see my answers in bold in your comments
Barry, I did some research to see if I could find a Release of Mortgage from my second Mortgagee but it doesn’t show up in the county records. The only Release of Mortgage we have is from our First Mortgagee. It has been 3 months now since the closing of the Short Sale and there is no trace of a second Release of Mortgage which in my opinion has to exist due to the sale of the property. Anyhow I will proceed to bring this to the attention of the Title company and see how is it that they were able to close on the property without a Release of Mortgage from the second Mortgagee, hopefully they will be able to contact the Bank and or do whatever then need to to resolve. If not then I will have to seek legal advice as you suggest.
Again, thank you so much for your time, interest in my situation, wisdom and knowledge. I could tell right away after reading your responses to others that you understand very well the issues presented to you which is why I decided to bring this concern to your attention. You have helped take a large part of that burden off of my shoulders by helping me to understand more about this issue at hand. I can’t thank you enough for the peace of mind your response has given me.
Thank You. I will definately keep you informed.
Oh.. I almost forgot! The Bank is the one making the calls themselves not a collection agency. They even sent us a letter which states that they are willing to accept $25,000 instead of the supposedly $75,000 DJ if we respond promptly, and they will even allow for this to be paid in partial payments.
Tina it’s my pleasure and if you have any questions please feel free to ask. It’s funny they mention a deficiency judgment. Let them know it’s not possible. Remind them there is no lawsuit and nothing to adjudicate. Don’t fall for their shenanigans and GET THAT RELEASE…someone has to have it!
Barry,
My primary residence has already been approved for a short sale through GMAC. The approval letter states that a short or negotiated payoff may have tax consequences and to contact an accountant. The letter does not state that they will waive their right to come after me for the difference and they will not change it.
I want to make sure I understand this correctly. They can either pursue their right to come after me for the difference or issue me a 1099. They can’t do both. Is that accurate?
Thanks,
JT
Hey JT, thanks for stopping by and thanks for your comment. According to what you wrote above..here’s the deal..as we see it. (Of course we are not attorneys and you should seek advice of counsel..blah..blah..blah..)
That being said, If your short sale was approved, and the transaction actually closes, and the money is wired to your lender as the payoff per the terms of the short sale approval letter…then you have done so…meaning PAID OFF the loan. There is no possible way that the bank can obtain a deficiency JUDGMENT against you as they agreed to take a discounted settlement.
Now there are thousand sof people out there, real estate agents and attorney’s who get confused on this. Notice I said deficiency JUDGMENT. There is a difference between a JUDGMENT and the bank selling a shortfall on a mortgage to a collection agency who then tries to hound you into paying them a bunch of money that they bought for cents on a dollar.
So…simply wait until the Satisfaction / Release of Mortgage is filed on the public records and tell the collection agency or whomever to bugger off. I have debated lots of attorneys and have had to explain to them this simple premise. However, it doesn’t stop the scumbags from calling you around dinner time. To deal with that you’re going to have to take action…if it ever comes to that which I doubt it will.
As for the 1099, yes, you will receive a 1099 for the forgiven debt (amount of the discount) but good news!!! You say it’s your primary residence and as such you are exempt from any tax liability due to the Mortgage Debt Relief Act….that is until Obama takes that away too!
Barry, I don’t see a 1099 from the Equity line in the closing nor am I able to find the Release of Lien from the Second Mortgage. Other than this My husband and I requested a Loan Modification from the bank we waiting for what their response, and waited and waited, I was constantly making calls to find out were our Loan Modification was at. When I called them recently they said my house was in Foreclosure, I have run every which way to resolve this matter with no success and today I received a Resinstatement Cancellation Letter that says in order to stop the Foreclosure process we need to come up with almost $20,000.
This is impossible, I have a document that states that they would not initiate any Foreclosure proceeding if we complied with trial payments during the Loan Modification. Now they have blocked me from making any payments at all, I tried to make July’s and August’s payments over the phone, and at the branch with no success We have been in full compliance on this Loan Modification and they threw my home into Foreclosure anyway. What can we do to prevent the loss of our home? I saw an attorney today who told me there was nothing that could be done at this time and that even the attorneys are getting letters from the state stating that they cannot help with Loan Modifications. Is this true? Where is the help that was suppose to be for home owners in distress. I can’t find it anywhere. I need some really good advice or help to prevent the loss of my home. Thanks again.
Hi TIna…I am confused about you looking for a 1099. You normally would not be recieving a 1099 unless you had a successful short sale. Sounds like you did not do a short sale but rather went the Loan Modification route and ended up like so many other homeowners. Loan Modifications, unfortunately do not seem to be working for a lot of people. Most attorneys we talk to don’t get involved because it’s a losing proposition and because there is no money in it for them.
We don’t do anything with loan mods. It’s just not our area of practice. Sounds like you may need to begin visiting your options for a short sale. It may be your only way to go right now. Sorry for the bad news.
I’m sorry I confused you. In regards to the short sale, that was the property I had mentioned to you back on July 29th 2010. Remember I mentioned that I could only find the Release of Mortgage from my first mortgage? Well… I still cannot find the Release of Mortgage from my the second mortgage. The continue to harrass us with calls and letters about a Deficiency Judgement when the property was sold through short sale. I just saw your video, FANTASTIC JOB!!!
The only thing that is worries me is I don’t see the Release of Lien from the Equity Line (Second Mortgage). But the property was sold.
Regarding the Loan Modification…. thats for my primary residence. Can you direct me to a good attorney? I can really use one who specializes in real estate. Thanks.
Hey Tina…glad you found the video informative…the release has got to be filed..it’s definitely coming. Call the title company who closed and tell them what’s up? Tell them you have to have it. IF the Buyer who closed finds out that there is no release..they’re gonna freak.
As for an attorney…what state are you in? Nevada? I don’t remember…sorry
I will call them tomorrow. Thanks. I am in Florida. Do you guys have a Facebook page? I would love to share this link on mine, is that O.K.?… I am sure lots of people would benefit from all the info, it’s absolutely fantastic. I love this site
Hi Tina…we have a facebook page but primarily just re-post to it. This site is our flagship. Feel free to share anything you’d like. I really appreciate it. Email me at info@realestateradiousa.com and let me know where you are. We’re in South Florida and perhaps we can help you find a reputable attorney.
Are you saying that after a short sale, you are released and settled from your 2nd mortgage as well? I.m getting calls from a collection agency as well. 2nd mortgage after short sale was short over $55,000. They willing to settle for $13,000 to release me from future or present obligations
Hi Arthur..I don’t know what the terms of your short sale approval letter said, but in order for your house to have been sold, a release or satisfaction mUST be filed. Your buyer would not have been able to obtain title insurance. There are tons of collection agencies out there who think this is easy money. Do your homework and get your docs in a row and if you have to, file a FCRA claim on them and substantiate it with your paperwork. Let me know how it goes…and if u have any more questions. Watch the video for even more clarification.
Barry,
I received word on Friday that my short sale is progressing. Chase needs a title cleared up and a counter offer at a certain price ($5k a part). I contacted the buyers Realtor directly. She sent me an email saying that her buyer has accepted another offer and would be closing on that property two weeks from now. My contract with this buyer has long sence expired. If their deal falls through, hopefully they will come back to me. My questions are:
1). Can my short sale attorney say that I owe them money for getting me to this point? As it turned out, they were of little help as I ended up calling Chase every other day for up dates (side note – calling the Chase Customer Service line for updates everyother day is not a bad thing).
2). Can the Realttor come after me for anything? She found the buyer, time expired, the buyer found a different house.
3). I am currently 2 months going on 3 months behind. No buyers in site, do you think a modification is a possibility? This is a rental and not my primary home.
4). How long is a short sale offer from Chase go for?? I have not received any paperwork at this point.
Thanks..
Hey Dan…in reference to your attorney wanting to get paid, that’s going to be dependent upon your agreement with them and what you signed. As for the Realtor, are you talking about a listing agent or Buyer’s agent? If you have a listing, you need to check your listing agreement. if the Buyer had an agent you won’t owe them anything.
Loan modifications have been a tough road to go down and we don’t have anything to do with them…so I can’t help you there. As for how long the Chase offer is good for…it should be specifically detailed in your approval letter.
Hi Barry,
Thanks for all this great info. I have 80/15 loans. Both are non recourse (confirmed w lenders). We just got our first offer and my agent says she will send the offer over to banks and then I will be submitting the rest of the required docs/hardship ltr, stmts, etc. Is that typical? Also, more importantly, at what point do I ask the lender to report this transaction as Paid or Settled. I doubt my agent will help me with this so it’s on me. Should I include this request in my hardship letter or after it’s assigned to a negotiator? I want to make sure I do things properly with higher likelihood for success. Thank you!
This is a great site and very helpful thread! Hopefully someone here can help me. We just short sold our primary residence in FL earlier this year with Bank of America as our lender. They refused to give up their right to pursue a deficiency judgment in their approval letter, but 60 days after closing, we received a satisfaction of mortgage which states that the lender “hereby acknowledge full payment and satisfaction of said note and mortgage deed, and surrenders the same as cancelled”. The satisfaction of mortgage refers to the full amount of our mortgage as well. My question is, does this recorded document preclude them from filing a deficiency judgment against us? My wife and I want to purchase another home sometimes in the next two years but if this deficiency judgment is still a possibility.
Bill thanks for your comment and for stopping by. Your comment underscores what I have been saying for nearly two years!! It’s even what we showed people in our video and many still simply don’t get it. I’m not a lawyer, and you certainly want to check with yours…but from the hundreds of attorneys we have spoken to and the huindreds of short sales we have done, you my friend, IMO, are holding the short sale get out of jail free card! No deficiency judgement can be filed against you because the bank openly has stated to the world that you have paid the debt. Make sure, should your credit report state otherwise, that you file that with the various credit bureaus.
Hey you bozo realtors…NOW DO YOU FRIGGIN UNDERSTAND!!! Sorry for being a bit upset but i am so tired of realtors not telling homeowners the straight scoop. Thank G that yours worked out well for you Bill.
Hi Gloria…quick question. Did you sign the contract submitted by your buyer? If so, that’s the ONLY time ANYTHING should be sent to the bank other then the Letter Of Authorization.
Now right off the bat, I can tell you are dealing with a realtor who hasn’t a clue. NOTHING other than the LOA is to be sent to the bank. You need to send your entire package to the bank at once. You need to complete your package and add any documents that they may have as bank specific documents. Our package exceeds 100 pages. There are no shortcuts and if your realtor won’t do it then get another realtor…fast!
See Bill’s comment above and you’ll see how you get proof of payment…let me know if you need any more help or further clarification.
Barry,
Thanks so much for your response. The reason I sought you out was because after doing my own research on the matter, I am of the same understanding that you are. I work in corporate real estate for a large South Florida company and while I am no attorney, feel comfortable in my ability to read legal documents and understand the basics. Unfortunately, because the current short sale phenomenon is considered “uncharted waters”, the attorneys we consulted could not give us a concrete answer as to whether we were still subject to a possible deficiency judgment, or whether or not our full satisfaction of mortage and note could be used as a defense, which seems ludicrous. Had the satisfaction of mortgage stated that only the mortgage was acknowledged as paid in full, we might still be on the hook for the note, but the because the note (which is the obligation itself) was acknowledged as paid in full, we should be free and clear. How can a company seek a deficiency judgment for something that they acknowledge as being paid in full??? You mention that you’ve spoken to hundred of attorneys. I would truly appreciate it if you could point me in the direction of a QUALIFIED attorney in South Florida, if you know of any, who are experienced enough in this matter to settle this for us. Thanks again for everything you do!
Bill
Hi Bill… I’ll email you the contact info for you to contact here in south florida
Barry,
Thanks for the great information over the past year or so…
When you complete a short sale, what does the bank make you sign? I am holding my house in an S corp with 4 other friends. We are in the process of short sale with the bank. We had a buyer lined up who could not wait for the bank and has moved on to another property. One of my partners asked me a question that I would think is fraud. He wanted to know what would provent him from buying the house in short sale? The mortgage is in my name, the house is being held in deed in our corp name. He thinks we can quit claim the deed to my name in order to provide clear title for the bank. The mortgage and title would both list me alone. The bank approves the short sale to him, and then we start over at a lower mortgage with him as the front person. My first comment to him was that if you can afford to buy the house, then we should be able to afford to make the payments… My second comment was that I would thing that is fraud. If it were not, why wouldn’t everyone place their property in a corp, then have a relative buy it at a short?? I would think the bank would require some kind of waiver or agreement. Can you point me to what that would be – not seeing it on the internet.. Thanks.
Barry,
Can you explain this to me? One West (our primary) is releasing the lien and not pursuing deficiencies. I’m reading my letter from Greentree my second and this is what it says
“The current payoff on your above referenced account is $48,930. Please be adviceds that Green Tree Servicing LLC will accept and consider payment in the amount of $9000 on the account as sufficient to release the deed of trust. Any funds in your escrow account will be applied to your remaining loan balance. Upon receipt and verification of funds, Greentree will release the deed of trust/mortgage. However the remaining obligation due under the Note or any former or subsequent modifications to the note, shall remain fully due an payable”
I’m assuming the balance will be headed to a collections agency? Also could I get a 1099 from One West and still be liable for the second? I’m hoping I don’t end up in court, but again, they will pursue me either collections or court on the second right?
Hi MaryAnn,
What state are you living in? I need that before I can assist you …please get back to me.
Massachusetts