What Happens With the Short Sale Deficiency Balance? Part 3
June 23, 2008
Here we wrap up our 3-part series outlining the major points concerning a short sale deficiency balance and what you need to be thinking about when faced with one.
It’s important that you do watch all 3 videos if you are going into a short sale situation because the deficiency balance is going to be handled in one of thee ways. In my experience you have about a 45% chance that once the bank agrees to allow the short sale to proceed, they won’t do so without you reassuming some (if not all) of the negative amount that is left over after the short sale.
In this video I give you a horror story that happened on a short sale an associate of mine was working on . We’ll also go over the fact that when required to reassume some portion of this negative amount, it might not be such a bad deal after all.
Do you have a story of your own to share? Perhaps Wells Fargo put a gun to your head and required you to promise to pay back every last time or they were going to deny your short sale application? Let me know in the comments below.
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4 Comments, Comment or Ping
Ed
what are the typical terms that lender requires when signing a note for any deficiency balance? is there a maximum number of years, will they normally give a favorable rate? so might the lender do a 30yr unsecured not at 5%?
if it is the hybrid scenario how might the forgiven debt reflect on credit?
Dec 3rd, 2008
Brian Kurtz
Ed,
Typically I find that the bank puts the repayment terms on a 10 year plan. Rate USUALLY goes down to 0%, so you’re basically paying back all cash.
Somethings a rate is in effect, but usually it’s not higher than 5.5%.
HELOCs are different. The debt is often not forgiven and there is no change to the rate. The bank just releases the lien that ties the HELOC to the house and it becomes freestanding debt and whatever payment terms were in effect stand.
I don’t know how things will effect credit in the Hybrid scenario. To be honest, I have not had any clients ask me to pull their credit a few months later and check.
Dec 3rd, 2008
Ed
Brian would you recommend that I contact my lender to initiate the short sale process or should I speak with a Realtor first? I am relocating for work and will not be able to afford rent in the new city and the mortgage on the current home. I am in FL where prices have plummeted…
Dec 8th, 2008
Brian Kurtz
Ed,
I would contact your lender first, immediately followed by a call to your agent.
Some banks will not work with you under you are a certain number of payments behind, and you never know if YOUR bank is operating on this policy with your particular loan unless you call.
Starting paperwork and exploring options with your agent is a wast of time if you have to wait until the end of February before your bank will even THINK of working with you.
Once you do know if they will work with you on a short sale, get in touch with your agent asap. The process is long and the sooner you can get started the better.
Dec 8th, 2008
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