I have done several short sales but do not consider myself an expert. Did you request the lender forego the deficiency judgement? I have included the request with my short sale package and they agreed to not prusueing the deficiency judgement. The seller did recieve a 1099 for the amount of loan forgiveness. They had to go to a CPA at my referal and did not have to pay taxes on this amount because they were insolvent at the time.
I am dealing with a family who just pulled out of a Short-sale because they finally got the idea of a Deficiency Judgement.
I tried to explain to them that it’s rare a bank goes after someone for a deficiency but their take is “We just want to walk away and not have to worry about it”. Great, so I explained the fact that if the house goes to sale and it doesn’t get bid up to what is owed, they STILL owe the difference, if the bank decides to go after them. I also told them the only way to be free and clear is to pay off the loan in full.
Lastly, they said that they’d rather take the risk of letting it go to sale and be bid up higher than my short offer would be so they at least owe less than if I were to buy it.
Does anybody have any ideas, statistics, or facts I can use to help keep this deal alive?
Re: Deficiency Judgement Fear - Posted by Joe Kaiser
Posted by Joe Kaiser on June 21, 2006 at 22:37:26:
Wow . . . you have a total misunderstanding here.
By definition, the lender agrees to forgive the difference and forgo any
deficiency, and that happens in writing.
You can guarantee the seller there will be no deficiency if he takes you
up on your deal, whereas walking away practically guarantees they’ll
get hit with one (foreclosure is where deficiencies happen).
Of course . . . I’ve never done a short sale before, so don’t quote me on