Deficiencies occur when a home is sold for less than the mortgage amount through a short sale, with the deficiency being the difference between the loan balance and the approved short sale price. Short sale sellers often are concerned about whether the lender will sue for the deficiency balance after the deal closes, and agents need to address this matter prior to listing the property. It is impossible to know for certain whether the lender will pursue deficiency, so agents should advise sellers to consult an attorney before proceeding with a short sale. However, some states, including California, have anti-deficiency statutes that protect sellers from deficiency judgments in short sales. They also can avoid deficiency judgments through the U.S. Treasury’s Home Affordable Foreclosure Alternatives Program and by reading the short sale approval letter carefully in search of language indicating that the lender “reserves the right to pursue deficiency.” Realtors in states without anti-deficiency statutes should seek to remove any dangerous language from the approval letters and have sellers consult a lawyer. | Read More
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