Can someone share some detail on what will happen if I have short sale/foreclosure with deficiency > $300K?

Asked by Bretton Lind, Lindon, UT Sat Apr 26, 2008

I have 2 houses worth a $1M plus that I can no longer afford. What is the bank going to do to me if I 1) short sale or 2) let it go into foreclosure. I would like to know about the affect to my credit, how to handle a deficiency (what will be required), will I or should I declare bankruptcy. What are my options and what are the repercussions of each choice?

Both houses are 90 days late, the loan is about $300-500K what I could sell for quickly and I have very little income. I am trying to short sale them to avoid foreclosure. What happens after I short sale or if I go into foreclosure. What is the bank going to require? Are they going to come after my business, other assets/houses, wife's income, etc?

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Linda Lund P…, Agent, Provo, UT
Wed Jun 13, 2012
The banks now have only a couple months to come after you for a sufficiency judgement...they used to have
6 years....I pay an attorney to work with me on short sales to negeotiate a settlement without a judgement with
the bank if possible. the bank pays my commission and I pay the attorney from my side of commission.

Worst case scenario, if they come after you for a sufficiency, then you either negotiate a payoff plan or file bankruptcy to make it go away. Awful things happen to hard working people, but that's why we have the bankruptcy laws so folks can start over.
Linda Pearson
Associate broker
remax Results
801 633 5230
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Kristine Par…, , Utah County, UT
Thu Apr 8, 2010
You will want to speak with a real estate attorney and your CPA. Utah does allow for deficiency recapture so you will want to make sure all your ducks are in a row.

As far as your other assets go- that really depends how everything is set up.

Best of luck. I deal with short sales everyday and know how stressful it can be.
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Eileen Lobel, , Vineland, NJ
Fri Apr 3, 2009
I agree with what the others were saying. Your 90 days so you will have to look into things fairly quickly. To do a short sale it has to be approved & from what I've heard is that you have to show it's listed with a realtor/broker . A short sale you could end up obligated for the difference or proving in the end that you didn't receive the ghost money for tax purposes. Bankruptcy stays on your credit for quite a long time so it's an option that I wouldn't take lightly. If you list your house try to get someone who is knowledgeable with short sales, from what I'm hearing it's not an easy road. I would call the bank as you might be able to quality for a loan modification. You can look on ( ) http://( they have some good info that might be helpful including info if your facing a situation such as yours & options that gov has & about Obama's help. Get out your loan documents and look them over to see what it says your lender will do if you can't make your payments. Find out what the foreclosure process & timeframes in your state ( - has resources. Also I belong to which has some good info - look me up, I will help ya if I can. I know this must be hard on you & I wish you the best of luck in figuring this all out!

Eileen Lobel
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James Graham, Agent, Midvale, UT
Fri May 30, 2008
A foreclosure will never leave your credit! Hire an agent that specializes in shortsales and knows how to do them. This is your best option! Your agent needs to know how to ask for a release of lein that doesn't obligate the buyer to repay the debt. There is a list of what you will need to get this done if you want me to send it to you! email me
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Maria C, , Salt Lake City, UT
Tue Apr 29, 2008
Andrew is right, the best advise will come from a RE Attorney, and a CPA.
Been late 90 days, at this time your lenders might have already reported you late to the credit companies, but a short sale affects the credit less then a foreclosure in a short sale your credit report will reflect late and a deficiency satisfied, but you will be able to work that out within a period of two years, A foreclosure stays in the credit report for a period of seven years in UT, but in the other hand if you declare bankruptcy for the deficiency that also will stay there for seven years as well.
The banks handle deficiencies depending in financial situation of each borrower, they will require a financial statement (verification of expenses vs income, assets etc, etc.).
You will also receive a tax form 1098/99 with deficiency as capital gains, ( government its working on the eliminating this)
Good Luck!
0 votes
oknothere, Landlord, salt lake city, UT
Sun Apr 27, 2008
The best thing for you to do is to speak directly with a Real Estate attorney and your financial adivsor (CPA) to find the alternative that is best for you. If you are going to file bankruptcy, then speak to a bankruptcy attorney.

Many "investors" and agents may approach with programs that will save you and your income, etc.... Avoid these like the plague and go to the professionals that will give you true legal advice. Be careful!
0 votes
Diane Menard, Agent, Marietta, GA
Sun Apr 27, 2008

First off here in Georgia you have to qualify for a short sale, not every one is eligible. You will have to check with the local laws there but in order to qualify for a short sale here the seller can not have more than $ 2500 in assets including 401k plans. You will net zero on a short sale, so do not be looking to make money that route.

Of course a short sale will not hurt your credit as much as a foreclosure will but it sounds like you may not have much of a choice. A short sale also means that if you have a first and a second loan, then the first lender will have to try to work with the second to see if they can get the deal done.

In most cases, if you do foreclose you may not be able to purchase another home for another 3 to 4 years.

My best advice to you would be to speak with a attorney to look at all your options.

Best of Luck!
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