If you short sale you will most likely be released from the note it all depends what the person representing you negotiated.

You need not take advice from an agent but you need to contact an attorney, make sure it is a Real Estate attorney and one that specializes in Short sales. I will say this, part of the trouble the banks are in are because homeowners bought and bailed, they purchased a new home for less value and walked from the old one! You can't do that any more, the banks are protecting themselves so you can't, they got wise but not soon enough.

Thank you for your answers everyone.
I live in Lake Park, Fl (33403) where the two homes accross the street from me have sold at auction for $100k each. Both homes have 500-1000 more square feet than my home, which was bought in 2006 and still has almost $220K owed on it. We have a fixed mortgage on it and never took out a HELOC. Our neighborhood had deteriorated due to all of the auctioned homes. We do not see our home recouping any value over the next 5 years. We were prime canidates for the 2008 housing and economic recovery act that was signed into law this past August and should have gone into effect Oct. 1. However, my contact at SunTrust just told me that the government has pulled that law back as of two weeks ago!
We do not want to have to foreclose and pray that SunTrust passes us over in pursuit with a deficiency judgement, so we have been advised to short sale. If we cannot sell the property after realistically listing it for three months, we may file for a deed in-lieu of forecloser.
This is so unfortunate, but it looks like we have no other hope...not now that all of our tax money is going to bail out banks!

I take it that you are refering to a "Foreclosure" where the Lender as taken the property as opposed to a "Pre-Foreclosure in which the property is still the yours but you stopped making payments and the lender has started the default process towards foreclosure. In Florida a Lender has up to FOUR YEARS to file a Dificency Judgement after the sale at the court steps. Some Lenders may not pursue this as they beleive that someone that lost their home would most likely ( at least visibly) not have an assets to go after, and the Lender would have to spend thousands in legal fees to get nothing. Also they are already overwhelmed with just foreclosing. But some may, remember unless your mortgage has an "exculpatory clause" the Lenders have this right to pursue a dificiency judgement. The best way to avoid a dificency judgement is to try and "Short Sale" the property or do a Loan Modification. It is too lenghty to explain everything in a forum.

Stephanie,

This is a great question.....and one that most people that have done a "foreclosure" DO NOT have accurate information on. Thinking the "foreclosure" process is going to make the problem go away may not be true.

As previously stated, contacting an attorney is well advised.....................

Good luck,

Stephanie, most importantly, I am neither a lawyer or a CPA and I would advise you to speak with both on this subject. Depending on the situation and loan type, the banks will usually not file a deficiency judgment, but rather issue you a 1099, which is similiar to a W-2, it basically says how much money you received, they can not do both, it is either the 1099 or the judgment. This amount of the 1099 would be the difference between what it sold for and what you owed. You will receive a 1099 from both a forclosure and a short sale, but typically the short sale will be a lower taxable figure and usually the smarter way to go. In some cases the 1099 will not effect you depending on the type of loan you received and the guidelines set up in mortgage debt relief act of 2007. Also in some situations, you may be able to file IRS form 982 , which shows insolvency and will also forgive you of the 1099 income. This form should definitely be filled out by a QUALIFIED CPA, meaning not someone who does your taxes from a desk at Walmart during tax time or any company like that. Usually in short sales, the lender does NOT require you to take on an unsecured debt, even when there is more then 1 mortgage. Typically, if a seller is required to take a loan, it is in most cases typically because the seller had a HELOC, which is kind of like a credit card, so it can follow you, even after the sale. I hope this helped somewhat and if you are in need of help with this type of situation, I consider myself a Short Sale Expert and would be more then willing to help resolve this issue for you. I can recommend a CPA and a lawyer for advice who can speak with you free of charge, on the ramifications of your options, but would not recommend them in the actual process of selling as that should only be done by an Expert. One last thing, a foreclosure will be a much bigger hit to your credit then you would get from a short sale, a foreclosure will come up on your credit as just that, and a short sale will typically come up as paid and contrary to popular belief, it IS possible to complete a short sale when you haven't missed a payment. Let me know if I can help. Good Luck.
Mike Ceparano, 813-417-6698
ceppym@yahoo.com

I am a Realtor in South Florida, I have seen judgments against borrowers for a deficiency and then some not at all. This may be due to different loans, which is not my expertise. I would suggest, this situation would be a very good reason to contact an Attorney, and ask for Legal Advise and/or Representation. More and more - Lawyers are specializing in Short Sales and the fees are very resonable.

Under the statute, seller carryback loans are not entitled to seek a deficiency judgment against the borrower. However, there is an exception under California's stare decisis (case law) that does permit the seller to recover against the borrower under certain circumstances.

As for the purchase money loans - no deficiency if it is owner-occupied, residential one to four. What does that exclude? vacation homes, home-equity lines of credit (HELOC), investment properties where the borrower does not reside there, apartment buildings more than 4 units.

These loans are commonly referred to as "non-recourse" loans because lenders on these types of loan know their only recourse is the security (collateral).

Each state is different. You should consult with an attorney for a definitive answer. The following is not advice, and is provided only as a cautionary statement to back up my advice that you consult with an attorney. My understanding is yes in many cases, except for government insured or guaranteed loans (FHA, VA). I understand as well that lenders can sue for a deficiency judgment in California if they filed for judicial foreclosure.

If you are not already in foreclosure, I recommend that you explore your loss mitigation options, and consider a short sale if nothing else works for you. In most cases, lenders forgive the debt in a short sale. A short sale will mar your credit for only 7 years, whereas a foreclosure and deficiency judgment can attach itself to you indefinitely.

See the following for more info about avoiding foreclosure:

http://www.hud.gov/foreclosure/

Interesting Question and Answer. Thanks for sharing!

Florida is a deficiency judgement state, so a lender can obtain a judgement for the difference between what is owed and what they eventually sell for a property for either at auction or after the auction as a foreclosed property.

Some lenders are starting to agree to a short sale with the provision that a borrower sign an unsecured promissory note for any difference, as well.

Any seller or property owner should carefully weigh all their options.