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Foreclosure in Southern Oaks : Real Estate Advice

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  • Home Buying12
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Activity 5
Tue Apr 13, 2010
Grace Hanamoto answered:
Hello Pen:

Short answer, if you, as the seller, sign a promissory note to pay for the deficiency, then, yes, you are liable for the amount. If the condition of short sale approval is that the seller must agree to pay for the deficiency--then, again, yes, the seller is liable for the amount. However, as the others have noted, there is a huge difference between being liable for the deficiency and being "required" to pay it now. In some cases, banks are agreeing to forego the immediate collection, but I do think that banks are just tricky enough to require that at some point in the future, the money be repaid.

This is why the provisions of the new HAFA (Home Affordable Foreclosure Alternative) program, enacted on April 5, 2010, has, as one of its requirements, a provision that disallows the lender from requiring the seller to be responsible for the deficient amount. In other words, the lender is agreeing, under HAFA to waive collection of any deficiency now and forever. However, HAFA applies ONLY to those short sales after April 5, 2010 (nothing before this date) and sellers must first try to apply for the HAMP program before being allowed to sell short under HAFA. Realtors who attempt to help homeowners with HAMP and HAFA should be trained to do so since the new rules for short sales under HAFA are drastically different than what we've seen in the past and there are specific short and long form applications for HAFA. Talk with a Realtor who has either a CDPE (Certified Distressed Property Expert) or SFR (Short Sale Certification under NAR) to assist you.

If you can qualify to sell the home under HAFA, you need not worry about having to pay for the deficiency in now or in the future.

Good luck!

Grace Morioka, SRES
Area Pro Realty
San Jose, CA
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Fri Dec 19, 2008
Mike answered:
There are companies that do not need a large dollar figure to purchase bulk tax liens on your behalf. Try Nationwide Tax Liens the website is I believe the minimal investment is 5-10k. They will do all the research and if the property comes back to you through foreclosure they will handle not only the foreclosure but any renovations to get it market ready AND they will sell the asset off for you as well. Really good company to start with, informative and customer service oriented. Hope that helps. ... more
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Wed Dec 10, 2008
Mysteryvxn answered:
Hi Nancy,

Please click on my profile and you will find more info on this from another thread I started. Good luck.
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Thu Sep 25, 2008
Monique Ramirez answered:
The amount owed is called a Deficiency. There are several ways a lien holder will handle the defiency amount, all which you should be aware of prior to agreeing to do a Short Sale.
The first is Forgiveness. The majority of the time when a Short Sale occurs, the deficiency amount is completely forgiven. Typically, if you are negotiationg a first mortgage Short Sale, they will forgive the deficiency.
The second is a Promissory Note, also known as a "P" note. A promissory note or a "soft" note may be negotiated for a reduced portion of the deficiency. This note is usually offered at 0% interest amortized over 15-20 years and is to be paid monthly. This note is always unsecured and if you are considering a bankruptcy, you should wait until the Short Sale is complete, and decide with your attorney whether or not you should choose to include the "P" note in the bankruptcy. Also know that if your loan is original purchase money, (meaning that you have not refinanced) California laws says that your lien holder cannot ask you to do a "P" note.
The third option is to file Insolvency. Your lien holder (bank) may choose to tax you on the defiency amount as a capital gains tax (1099 Tax Form). They consider the deficiency amount a gain to you, the borrower and thus subject to tax as if it were income. If this occurs, I advise you to consult with a tax professional or attorney.
In many circumstances a person just has to prove insolvency- or that they have no financial worth-and the 1099 will be disregarded. Because the majority of the homeowners that are participating in Short Sales are in a financial harship, they may be able to substantiate insolvency. Insolvency is the inability to pay one's debts as they come due. Even though the total assets of an individual may exceed their total liabilites, they are insolvent if the assets cannot be converted into cash to meet the current obligations.
The fourth option is a Cash Contribution. The lien holder (bank) may ask for a one-time cash contribution at the time of closing. This is a favorable compromise as typically the deficiency after the cash contribution is forgiven. It is my experience that the contrutions have been as small as $190 and as large as $5000. Keep in mind that all cash contribution requests are also negotiable. If you cannot afford a cash contribution, present an alternative amount to the lien holder.
I hope this helps you and all the homeowners facing the possiblity of a Short Sale.

Monique Ramirez, Foreclosure & Short Sale Specialist, Souther California, USA
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Thu May 1, 2008
Cindy Vedder answered:
One of the best resources I've found for 'Factual" tax lien information. Visit :
Copy and Paste. Good Luck. Cindy Vedder
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