My thought is that the seller is probably not going to go through the sale, unless they talk to a lawyer and decide that bankruptcy following the close of this sale is a better choice. I have heard of payments the 2nd loan is requiring have been in the $700/month range - it they had that kind of money, they probably wouldn't be in a short sale position to begin with!

If you signed a short sale addendum, (which we do recommend....) the seller has a right to not go through with the sale. That is why I almost always recommend that a buyer continue to look for other properties while they are in limbo. Check with your agent about what your options are - seller non-performance suit, having the seller declare bankruptcy after you go ahead and close on the sale, or you just getting your deposit back and starting over. I hope your agent is experienced in short sales - buyers and sellers need to work with agents who've been through it before, so that you are aware of the pitfalls!

ooh, and CA is a non deficiency state-- ( seller should consult a real estate attorney)

First of all i hope you didnt pay all these fees up front, because nobody will reimburse you! If the seller declines to sign... there is nothing you can do.. ( except get your deposit back)

Hi,

Yes, wait a little longer!
As you know on every short sale bank approval letter, the lender always recommends to the borrowers to consult with their tax advisor/ real estate attorney before signing, which they are the one who would advise their clients to sign or not to sign.
Short sale transactions are very complicated, and are case by case with so many different characteristics and tax implications for the borrowers.
I would recommend for you to stick around since you waited so long and wait for the lender's response, since most lenders would remove that language from the approval letter and to close their books. Realistically, it really doesn’t matter if the language is there or not; they could go after the borrowers anyway if they choose so, unless the deficiency judgment was paid.
I have closed several short sale escrows as a listing agent and almost all my clients except one didn't like the deficiency judgment language. I had to talk to the negotiators and let them know, which they finally removed it from the letter.
My most recent short sale listing with two loans, the second lenders finally approve the sale and agreed to exclude the language and we closed it two weeks later.
I do hope that your long waiting will pay off soon.
Good luck to you.

Amir Aliloupour, GRI
Keller Williams Realty
Aliloupour@yahoo.com
(925) 255-3219

Paisley:

The problem boils down to what the seller’s options are:

(1) Leave the deficiency judgment language in the short sale docs and face the possibility of the bank coming after her for the deficiency;
(2) Let the property go to foreclosure – her credit will be impacted more than if she short sells BUT the deficiency judgments will be removed;
(3) Try to get the bank to remove the judgments from the docs now. More and more are refusing to do so. They are willing to foreclose rather than remove the language. It’s not right, not fair but VERY, VERY real.

Since the third option is not likely to happen, she will opt for either of the first two options. We’ve had sellers go either way – there is no way of knowing until she makes her choice. I’m assuming you’ve expended monies for inspections, appraisal and so on – if she decides to let the property foreclose you will more than likely be out-of-pocket those expenses. You can always try to take her to small claims court to collect your damages, but she can probably make any number of cases that could potentially get her off the hook. These could be any of the following:

(1) The Listing Agent didn’t fully explain all the implications – once she discovered what they were she had to withdraw …
(2) She was that told the banks would cooperate – when they didn’t, she couldn’t proceed …
(3) She has no money – no assets – nothing on which to place a lien …
(4) And so on. Even if you get a judgment, how do you collect …

Not much good news here, sorry. You’ll have to sit and wait for the outcome. The last thing you want at this point is to have pressure applied to her – she might be tempted to come back later with a round of law suits of her own.

.

She is right the bank should remove the deficiency judgement clause on the approval letter. One of the things the bank is going to do is file a 1099C with the IRS. The "C" stand for Cancellation of Debt. How can there be a Deficiency Judgement if the bank is reporting to the IRS a Cancellation of Debt. In a Short Sale the bank is supposed to be taking what you are paying as "Payment in Full".
Perhaps the bank will realize the contradiction in terms and add the correct verbage to the letter.

Good luck.