Atlanta International Realty, LLC
Helmut Oscar Saroza
1. The bank can seek a promissory note for the difference
2. The bank can file a deficiency judgement - note that in the state of Georgia they must file within 30 days
3. The loan can be noted as "paid as agreed" or "paid without recourse".
You obviously want the third option and an experienced short sale Realtor will be working to ensure that this happens. Banks vary on this policy and it seems to change daily. Keep in mind that even in a foreclosure, the bank can still file for a deficiency judgement against you for the amount that is short, but a foreclosure will have a much worse impact. It can affect your credit score, your ability to purchase a home, employment, security clearances, etc.
By doing a short sale you are being proactive and it's typically a win-win for everyone. That is one of the key areas we focus on when negotiating short sales is helping the bank to understand that our client wants to do the right thing and get the home sold, rather than have it foreclosed, which invariably will cost the bank more money.
One final point regarding the "short" amount. It will also be reported to you on a 1099 as required by the IRS. Under the Mortgage Forgiveness Debt Relief Act of 2007, the law eliminates the tax on this amount, as long as you meet the criteria. The biggest one being that it must be your principal residence, which means if it's a short sale involving a vacation home or investment home, then the exemption would not qualify.
Hope that helps.
Certified Distressed Property Expert.