Foreclosure in Riverside>Question Details

Tiffany, Other/Just Looking in Riverside, CA

In a Short Sale, will the banks come after me later to collect the shortage or will I be forgiven and be able to move on like a foreclosure?

Asked by Tiffany, Riverside, CA Sat Sep 11, 2010

Just wondering what's better, a short sale or a foreclosure. What would be the benefit of a short sale if they still try to collect.

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12
Tiffany: Real Estate Agents cannot give legal advice. I have referred many people to http://www.curtislawgroup.com They give free consultations to distressed homeowners and can tell you if Short Sale, Foreclosure or Bankruptcy is best for you. As the others have said every set of loan documents are different.

Good Luck!
~~~
1 vote Thank Flag Link Sat Sep 11, 2010
Hello
It depends on the bank and who really owns the loan. Investors? Fannie Mae? and what you have agreed to, what the difference is that is owed beteen the agreed sale price and actual amount owed the bank. Sometimes the bank will ask you to repay a certain amount on top of the agreed price at 0% interest over 10years.These things are often negiotiated over and over. One recommendation would be to attempt to have it approved thru HAFA. Banks that are approving HAFA sale usualy write off the difference. Google HAFA online for more info. But although banks may participate in HAFA it does not mean they are obligated to let you go thru that program
If the difference between what is owed and the present market value is very large the property will often go in foreclosure. A Short sale will drop your credit score drastically and a foreclosure way more
0 votes Thank Flag Link Wed Sep 15, 2010
HI Tiffany,
There are a lot of variables.
It does depend from one investor to another.
I would say it also does matter if it was purchase money or refi and take a bunch of money out to buy cars and pay off credit cards etc.
There is huge differences between short sale and foreclosure.
Manly credit.
Fair Credit allows you to get credit, get jobs, get a car when you need one, get utilities when you move, tolerance for getting a rental, getting a fair price on all of you insurances, Security clearances, and the list goes on and on.
If you only have one loan, right now there is a program where as the lender down not come after you for deficiency and can not if you fall within some guidelines.
The only time I think it would be beneficial to foreclose is if you lied on your credit ap when you purchased the home. Other than that a short sale is usually the better way to go.

Harold Sharpe - Broker
So Cal Homes Realty
(951) 821-8211
harold@socalhomesrealestate.com
http://www.socalhomesrealestate.com
California Department of Real Estate License # 01312992
0 votes Thank Flag Link Sun Sep 12, 2010
Hi Tiffany,
There are variables to consider; First is your current mortage purchase money, meaning is this the mortgage you originated when you purchsed your home? Or did you refinance? Do you have more than one loan ? Califormia is a non-recourse state which means the lender cannot go after you for the deficiancy amount if it was the original loan your obtained when you purchased your home. Secondly have you applied for a loan modification through HAMP (making homes affordable), if you have and either the loan was denied or you were not able to continue with the modification, than you can apply for the HAFA Program. It gets involved, but I can explain it. I am a certified HRC (Home retention consultant) I am also certified with HAFA.. If you qualify for the HAFA program than by the HAFA guidlines the lender cannot pursue the borrower for the defiancy amount. There are steps involved but worth looking into. Additionally you will need to speak with your tax account person to understand any possible tax consiquences. If interested you can contact me for more information.

Marla Booth
Realty Executives
909-376-2397
0 votes Thank Flag Link Sat Sep 11, 2010
Hi:

Yes - you should consult an attorney. However, in simple terms it will depend on whether your loan(s) is purchase money (only taken to buy the house), or a re-fi (non-purchase money). And even then - there are some grey areas. But if you have a purchase money loan in CA the lender will typically settle in the short sale and you would be "forgiven". The outcome would be spelled out in your short sale approval letter. The outcome and language in the approval letter varies by bank (Bank of America has the most vague letter, Wells Fargo has one of the best).

In my opinion, if your house is really your only financial problem (i.e. bankruptcy isn't an option) a short sale is a viable option. You always have the choice, right until the end, to back out and terminate the transaction and opt for the foreclosure. But again, even in a foreclosure the bank can, in fact, come after you if the money was a fe-financed loan which can have persoanl liability.

Out website has some additional info on this subject (my husband happens to be an attorney!)

Good luck.
0 votes Thank Flag Link Sat Sep 11, 2010
Hi Tiffany , Whether banks can come after you and will pursue deficiency judgments depends on many factors, In the case of “Foreclosure or Short sales “ lenders can pursue deficiencies depending in what state the borrower lives in and whether there's a second mortgage or other liens.
You should seek the advice of a tax attorney, certified public accountant.
I Need to disclose this, ( This information is meant for general information purpose only is not to be construed to as tax, legal advice, please consult your CPA, Your attorney for legal counsel )
Some states, Such as California, are "non-recourse" and don't allow deficiency judgments. That means that the lender has no legal recourse to obtain a “ Deficiency judgments “ against you after a successful short sale or Foreclosure on a “ Non -recourse loan “ But, even there, if the original loan was refinanced, some or all of it may be subject to claims.
If there’s a second mortgage or other liens you are Personally liable from the debt that is a “ recourse - loan , Not matter if is a Short sale or Foreclosure ( there is a lot of confusion )
you should seek the advice of a tax attorney, certified public accountant.
Don’t forget before walk away you may have a “ 1099c issued by the lender after a short sale or foreclosure !!!I
If you are in a situation where you can’t afford to send the bank money and may be facing foreclosure, then a real estate short sale may be the perfect solution for you. First you’ll need to know if you qualify !
Not every homeowner is qualified to do a short sale in Riverside Ca, Surrounding Areas.
There are many different lenders, policies governing the short sale procedures. The lenders all have their own criteria of what short sales they will accept.
Remember in a Short sale event if your short sale is handled successfully, the lender may give up the right to pursue a “ deficiency judgment.

Let me explain to you the advantages of a “ Real Estate Short sale “
1-You pay no out of pocket expenses, This includes the real estate commission and all other closing costs.
2-During the short sale process you can remain in your home for FREE until it closes.
3-With a real estate short sale you don’t have a foreclosure on your credit you'll have an easier time finding a place to rent. A foreclosure or eviction are red flags for landlords.
4-You Save Your Credit. A short sale will have an impact of 80-100 points on one's credit, compared to 250-350 points a foreclosure has on a credit score.
5-You will be eligible, under Fannie Mae guidelines, to buy another home in 2 years.
6-Retain some dignity in knowing that you sold your home.
8-You help the economy one step forward to the recovery.
9-You can have a fresh star.

If you need honest professionals to guide you in the best direction Call me,
In a 15 minute telephone call, we can explain to you all the current options available to help you solve your short sale situation.
Contact me for a confidential consultation.
My services are always FREE to the sellers.
I am here to help you.
I am your local Pre foreclosure and Short sale Specialist. Who care about you and the community in which you live. And I can walk you through the process, determine your eligibility, and provide you with the best solutions available for your particular circumstances.

Cecilia Rodriguez. Specializing in Residential Real Estate, Pre foreclosures, Realtor, Distress property expert. Certified Action Specialist.

( 951 ) 858-5797
Lic # 01505884
Ceciliarod@prudentialcaliforniarealty.com
Prudential California Realty.
0 votes Thank Flag Link Sat Sep 11, 2010
Tiffany:

A short sale is a "negotiated settlement" with the holder of your loan. That means that everything is negotiable, including the bank's right to come after you for the unpaid balance on your loan. There are many reasons why a short sale is a better alternative than a foreclosure (contact me and I can review or send you this information, or you can go to http://www.StopMyForeclosureHelpNow.com - go the resource page and request any or all of the free reports available there). And as advised by others, talking to your accountant and an attorney will definitely help you understand the legal and tax ramifications of the path you choose.

If you decide to choose short sale, the most important ingredient in your success is using an experienced short sale listing agent. The negotiations with the bank rest firmly on their shoulders. Negotiating short sale terms that you will accept is their top priority. If the terms you receive from the bank are not acceptable to you, you can always decline the short sale terms. That is why an experienced short sale listing agent will educate you on what to expect, find out what your wants, needs, and desires are, and then advise you if they can help you. Any agent who tells you "Don't worry, the bank won't come after you no matter what the approval letter says" should be shown the door. I would be honored to help you by answering any questions you might have, or directing you to someone who can, at no obligation to you. Please feel free to contact me directly either by phone or through my profile. Good luck and Dare to Dream.

Shel-lee Davis, QSC®
Certified Distressed Property Expert – CDPE®
Short Sale & Foreclosure Resource – SFR®
Certified HAFA Specialist – CHS®
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
http://shel-lee.listingbook.com
0 votes Thank Flag Link Sat Sep 11, 2010
In order to best protect yourself and any assets you may have, before considering either option, do consult with an attorney who specializes in real estate--he/she will be your best source of information/advice.
0 votes Thank Flag Link Sat Sep 11, 2010
Tiffany,
It really depends on the type of loan you have and the occupancy of the home. And if you elect to short sale your home, the agent you choose will have a massive impact on whether the banks negotiate to pursue you later.
We have been very successful in obtaining deficiency waivers for our clients with recourse loans.
For more information, you can reach us at 951-314-5402.
Brian Bean
Certified Short Sale Genius Elite
0 votes Thank Flag Link Sat Sep 11, 2010
Tiffany,
I agree with both these answers. There are multiple factors in all short sales and there is so much info out there that is overwhelming as consumers into leading you into the right or wrong direction. Fortunately for the homeowners in Riverside County, there is a non profit organization that has been formed especially to educate homeowners on their rights and options for qualifying for home modification, info on short sales and foreclosures. The group is called H.E.L.P- you can find more info at http://www.freehomeownership.org . I have been to the free seminar and it was eye opening. It is always a good idea to talk to a tax attorney, abnkruptcy attorney and a real estate attorney also to see what your options will be. I hope this helps! Good luck!
0 votes Thank Flag Link Sat Sep 11, 2010
Tiffany,

It has been our experience that different banks subscribe to different policies and therefore there is no simple "yes or no" answer to your question.

Possibly the best approach for you is to employ the services of an attorney that specializes in short sales for their advice.

Good luck,

Bill
0 votes Thank Flag Link Sat Sep 11, 2010
Tiffany:

As with all questions regarding the law and interpretation of contracts (your mortgage agreement, for example, is a contract), your very best and most accurate answers will come from a qualified real estate attorney. However, in my unlegal opinion, here's what most of us have been told:

1. Can the lender come after the home seller for the deficiency in a short sale?

Yes. Both the first and any subsequent lien holders may try to collect for any unpaid funds in a short sale through a deficiency judgment. In some cases, like B of A, for example, the seller is asked to sign a promissory note to get the short sale approved. The promissory note is another method to "bind" the seller to pay for the amount due after the short sale. The HAFA program (Home Affordable Foreclosure Alternatives) was intended to help "stem" the deficiency judgments by allowing homeowners to short sell their homes while also forcing the banks to accept the proceeds from the sale as payment in full on the loan without the right to seek judgment from the seller after the sale. Unfortunately, many homeowners do not qualify for HAFA, so bank can and, I've been told by experts, will seek to get some money from sellers after the sellers have reestablished credit and financial histories. Only time will tell.

2. Which is better a short sale or a foreclosure?

That really depends on your situation. Here in California, for example, only a purchase money loan (the first loan that you used to buy your home) is considered a "non recourse" loan--one in which the lender may not seek further payment from you in the event your home forecloses and the resale value is less than the loan. If you've refinanced your home loan or pulled money from the loan, these lenders have the same rights as they would in a short sale to seek payment from the home seller for any shortage on the loan. So, if you've refinanced, there is no shelter against later collection actions in a foreclosure.

Further, foreclosure, I've been told, is far more devastating to your credit than would be a short sale. In most cases, a foreclosure causes a loss of more than 200 points from the FICO score. Short sales appear to have a less devastating effect on a FICO score.

So your choice regarding the best options for your distressed property rest with the circumstances of your loan and the balance due. Again, talk with a qualified real estate attorney regarding the collection and legal ramifications, and if you want more information about federal programs available to distressed owners, go to http://www.makinghomeaffordable.com.

Good luck!!

Sincerely,
Grace Morioka, SRES
Area Pro Realty
San Jose, CA
0 votes Thank Flag Link Sat Sep 11, 2010
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