On a short sale where the bank requests the seller to sign an unsecured promissory note as a condition for approval and the seller refuses to sign.

Asked by Mercedes Franco, La Mirada, CA Sun Feb 7, 2010

The seller wants to sign off to the bank or let the bank foreclose. The IRS consequences and credit damage the same on a short sale and foreclosure?

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Joanna Jensen, Other Pro, Livermore, CA
Sun Mar 14, 2010
Depending on the value of the home and the the equity in the 2nd loan..
for example, lets say the home is worth $400,000 with a first loan of $425,000. It doesnt make sense to sign a promissory note if there is no value to the loan. Also, what type of loan was it?? Purchase money second

You have a few things to think about:
Are both lenders the same or are they different lenders?
Some times as a negotiating tool signing an UNSECURED NOTE is not a bad idea.

You have to look at your clients entire financial situation.
Best of Luck
JoAnna Jensen
Legal Assistant - Certified Debt Arbitrator
Legal Realty
925 699 5041
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Aaron Zapata, Agent, Placentia, CA
Mon Feb 8, 2010
No, the credit damage is not the same on a foreclosure and a short sale. They are not as bad for a short sale, but still bad. On a recent call with a Wachovia VP, he stated that they'll loan again 2 years after a short sale as opposed to 5+ years on a foreclosure.

As an agent, you want to be cautious though when advising your clients about tax and credit score ramifications. You are not an accountant nor are you a credit counselor. You sell homes.

Good luck Fran!
Web Reference:  http://aaronzapatablog.com
0 votes
James Gordon…, Agent, Hamilton, OH
Mon Feb 8, 2010
Fran you need to have your client talk to an attorney about the ramifications. I have not heard of a lender that allow someone to "sign off to the bank" when there are multiple liens involved. The second can force a forclosure on the property and with the upcoming situation in the credit market who knows what the restrictions will be.
Web Reference:  http://www.Find1Home.com
0 votes
Pat & Steve…, Agent, Westlake, OH
Sun Feb 7, 2010
The Seller needs to consult an attorney regarding the consequences of his/her actions or nonactions. A consultation with an attorney who handles residential real estate matters is well worth a reasonable fee.
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Keith Manson-…, , Milwaukee, WI
Sun Feb 7, 2010
The seller needs to understand their options and if the debt is recourse or non recourse in califorina. If this is a second mortgage, there seems to be more of a trend for the seconds trying to collect on or after short sales.

The other thing that is interesting is with the hafa program coming out 4/5/10, how will the seconds postion effect that program?

Keith Manson
First Weber Group
Certified Distressed Property Expert
Metro Milwaukee

0 votes
Sylvia Barry,…, Agent, Marin, CA
Sun Feb 7, 2010
Yes, have your seller consult with tax accountant and tax attorney on their individual situation before deciding what to do. People can provide generalized advise here on Trulia but nothing compares to individulalized analysis on the sellers situation. And you should let the seller do what is right for them.

Sylvia Barry
Web Reference:  http://www.SylviaBarryRE.com
0 votes
Anna M Brocco, Agent, Williston Park, NY
Sun Feb 7, 2010
The seller should probably seek the advice of an attorney before signing any promissary note--most professionals do offer a free consultation.
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Bob Alston, , 92399
Sun Feb 7, 2010
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0 votes
Bob Alston, , 92399
Sun Feb 7, 2010
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