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Tim, Home Seller in Amesbury, MA

Am I resposable for repayment if my home is forclosed. were hoping to avoid forcloser by doing a short sale .

Asked by Tim, Amesbury, MA Wed Mar 18, 2009

we have an offer and waiting for lender approval. If they dont approve we may have to have the home forclosed

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9
Kevin Vitali’s answer
There are many variables with not enough information to answer properly. Because Massachusetts is a recourse state their is always a potential for the bank to come after a deficiency in either a short sale or a foreclosure.

Even if they can do they always? No.... but it is important to know what are the possible scenarios you are faced with.

In a short sale even if they "retain the right " to pursue a deficiency judgment there are still advantages to doing a short sale. here is an article explaining some quick reasons why....http://merrimackvalleymarealestate.com/2011/02/massachusetts…
0 votes Thank Flag Link Thu Apr 7, 2011
Do you want to keep your home? If you do… apply for a loan modification. You will have a lot of paperwork to get the bank, but the rewards are generally worth it. I know people that have had their interest rates dropped to 2%, an unbelievable savings. If you are being contacted from some of the loan modification companies, do not pay them until you check them out on BBB or with the Attorney General’s office. Some of these calls are scams and take you much needed capital and give you little in return. Know this is something you can do yourself simply contact your bank and ask for a loan modification package. It is a lot of work but worth it, it can have quite a difference in your payment. In some cases it can drop your payment lower than the rent you will pay after the sale.
0 votes Thank Flag Link Tue Jul 23, 2013
Hi,
When I first answered your question HAFA didn't exsist. Their are many resources for HAFA and NAR has a brochure that is helpful to homeowners :
http://www.realtor.org/wps/wcm/connect/8f4a578041f01b379ce4d…
also:
http://www.realtor.org/wps/wcm/connect/3400520042baa210a512b…
and a FAQ:
http://www.realtor.org/wps/wcm/connect/9129218041fa193e98a4f…

Read those and you will see how confusing things can get.

You need a Realtor who is trained how to handle Short Sales and knows how to guide you through the complicated process. Your agent will bring -in all the necessary players to help increase your chances of success. Always seek legal advice and always call your lender at the first sign of financial trouble. There are alot of other considerations to take into account, but every situation is different and that is why you need someone you can trust. You need to trust the Realtor because you will be shareing alot of personal info with him/her and ofcourse their will be lots of STRESS.
Good luck and God Bless.
0 votes Thank Flag Link Tue Jun 8, 2010
Not if you're approved for a HAFA short sale. So long as you have only one mortgage and get your home under contract and approved as a HAFA short sale, you will not be responsible for repayment, HOWEVER that doesn't mean a 1099-C won't be issued. BEWARE THOUGH, HAFA SHORT SALE HOMEOWNERS SIGN A DEED IN LIEU. The lender can exercise their right to take the home by "friendly foreclosure" (DIL) at the 120 mark if the home isn't under contract. HAFA is for non freddie mac/fannie may mtgs. ALTHOUGH FREDDIE and FANNIE are releasing or have just released their own version, which is similar.

The 3 typical outcomes of a TRADITIONAL short sale are:
1) No deficiency or ZERO deficiency - so they will not chase you for the balance, but a 1099C may be generated and you would need to talk to your accountant to see if you would fall under the debt forgiveness act and are insolvent.
2) Lender asks for a promissory note. This could rage from a few thousand to ANYTHING. So they may give you 4 years to pay off $15,000 for example and then not chase you for the rest.
3) They reserve the right to pursue you for the deficiency...WHICH means JUST THAT. They are reserving the RIGHT. It doesn't mean they will. It doesn't mean they won't. Statute is 20 years in NH and MA that they can collect if they do decide to pursue.

IF YOUR HOME IS FORECLOSED, they will likely pursue you for the deficient amount PLUS any other fees, court costs, home maintenance, etc., that they can tack on.

Good luck. I say go for the short sale, but then again, I buy short sales so I do think they have distinct advantages for homeowners.
0 votes Thank Flag Link Mon Jun 7, 2010
You really need to consult with your own attorney familiar with short sales & foreclosure law. Each case is individual & each bank operates by it's own guidelines. Ask your tax preparer/CPA for a qualified attorney to guide you through the steps. This can be a highly technical avenue and you must be careful what your signing & agreeing to, you'll need more than just a real estate agent/brokers opinion on how to proceed.
0 votes Thank Flag Link Wed Mar 18, 2009
The bank does have the right to go after a deficiency judgment if they foreclose. I believe the statute of limitations is 3 years for them to file and 20 years to collect. The banks have not been go after these judgments but remember they could. I think it costs them too much money and you don't have any, so you are not seeing them go after the deficiency judgments.

A short sale in Massachusetts in most cases is better for you if you can negotiate one with the bank. Your credit will be healthier and you won't have a potential deficiency judgment hanging over your head.n There are some other considerations, but with out knowing your whole situation its hard to advise. If any of this is important to you consult an attorney. A good short sale negotiator will get the job done, hang in there. The banks take their sweet old time.
0 votes Thank Flag Link Wed Mar 18, 2009
Tim

Most banks are not requireing repayment if the home is a primary residence but as Nancy said each bank is different. Speak to your bank about your different options you may be able to avoid the forclosure if the short sale doesn't work out by doing a modification or a refinance. They would rather talk to you than have you walk away from the home.

Good Luck
0 votes Thank Flag Link Wed Mar 18, 2009
Hi Tim,

Each bank has a different way of handling the situation. I've had bank's 1099 the difference in loss (amount paid and amount owed). Then I've had banks make the sellers sign a Promisory Note that they will pay back the bank and you can make the arrangement with them. Then there are some banks that just write off the bad debt and the seller's never hear from the bank again.

The problem is with most banks there is no standard protocol as to how to handle a shortsale, thus making it more stressful for the seller, not knowing "what's going to happen".

Whatever the outcome, it's better to shortsale the property than to go to foreclosure. Statistics show that your credit can recover from a shortsale within 3 years as opposed to the 7 years damage to your credit from a foreclosure.

There are supposed to be rules & regulations being put into place by the govenment that would take the mystery out of "what happens". I would ask your tax consultant if he is aware of any rules as of yet or how the loss will affect your taxes.

Best of luck with your sale, and I would also say to use an agent who is familiar with the Shortsale process, as that process alone for the realtor can be quite difficult and arduous.

Nancy
0 votes Thank Flag Link Wed Mar 18, 2009
No you are not in most cases. You do get a big red flag in your credit report though. It will be roughly 7 years before you can buy agian.
0 votes Thank Flag Link Wed Mar 18, 2009
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