BiggerPockets

Hello CTC,

I have a concern. I recently had a short sale approved in California through B of A and the buyer wants to close asap. I got a letter from B of A stating "BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment recieved and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above."

Can they really come after me for the difference? I thought this was the whole purpose of the short sale...to avoid it. I've relocated and find a new career so I don't want to risk taking that hit. Any advise?

Matt

Whatever is written in the acceptance letter is what the property owner, buyer, and Lender will go by. The property owner MUST sign the acceptance letter, thusly accepting the terms.

Someone should have told you that this was a possibility. Also, the person that negotiated the short, should have requested for no persuit of a deficiency in the contract/ contract addenda.

Do you suggest that I consult an attorney before signing any docs?

I would if I were you. They will give the best advice. Also, ask them if it holds water and if they can get it removed for you.

Matt,

I am an asset manager, and deal with these kinds of things every day. In order to complete the short sale, the bank should have required a lot of financial documentation from you, including the past two years of tax returns and at least three months bank statements for all of your accounts.

The purpose of this clause is that if you are sitting on a large sum of money, they are reserving the right to go after you for the deficiency balance. You should make sure what their intentions are before signing the documents. Someone must be in touch with an asset manager at B of A in order to have gotten this short sale approved.

In most cases, the bank I work for does not go after the deficiency balance, however, we do normally require that the owner/seller contribute by signing a promisory note to help absorb some of the loss. This is usually in the amount of somewhere between 5k and 10k and spread over 30 years. The thought process is that they are excusing you of 100k in debt for exchange of only 10k of debt (much more manageable).

Please talk to an attorney FIRST!

Do not attempt to talk to any asset manager unless the attorney tells you to talk to them.

And, as the property owner, do not offer any money to the asset manager. PERIOD!

Hope this helped.

Not to pick on Matt, because I think this attitude is becoming common, but the "whole point" of the short sale is NOT to allow you to eliminate your debt. It is to allow you to sell and remove that monthly mortgage payment and move on.
Why do you think that the point is to allow you to eliminate your debt? That is bankruptcy, not short sale. You lost money on your investment, you are supposed to "take the hit". You aren't supposed to be able to walk away scott free.

Eric

Okay,

Normally I do not get into a word game here on this site. But since I was called out, I will retort.

1) I have never made any comments about asset managers. So to assert that I have is completely false!
2) As an "asset manager" it is not your job to help a home owner sale the property in question. This also is false. Your are hired to represent the Lender that pays you.
3) You can not charge any fees for services, since you are paid by the Lender that hired you. Saying you do not charge fess also is misleading.
4) Stating that the hiring of an attorney will "not change anything". This statement is absurd. I am sure that attorneys would love to here you say they will not change anything.
5) Your continued statements of making property owners pay a contribution is also misleading. I have completed HUNDREDS of short sales. Yes I said HUNDREDS. And not one(1) of the property owners have ever paid a contribution.

And now I will end this converation. I must appologize to all members here on BP. I do not condone these types of replies. But, if called out, I will retort!

I actually do help people to sell their properties, but thank you for telling me what my job entails. I get them in touch with real estate agents, and allow them to complete a short sale. Without allowing them to do a short sale, they will NEVER sell the property because they owe more than what it is worth. So if you ask me, that is quite a lot of help.

I will also be happy to speak with any attorney and tell them directly that they cannot change anything that I can or will do for a customer. I genuinely do the best I can for everyone, and am tied down by the guidelines of the investors who purchased our loans. So a lawyer does nothing but hamper communication with the customer and make the process take longer. No matter what a lawyer says, if my investors will not allow me to bring a loan down below a certain interest rate, I cannot do it.

As far as never having a customer pay a contribution, good for you, but my bank does not allow that in most situations. If we are going to forgive a customer of 100k in debt, they can and should contribute something towards their obligation.

And I'd love to know how it is misleading to say that I don't charge fees when in fact, I don't? I'm being paid by the bank, not by the customer. Regardless of whether you want to believe that I charge a fee or not, a customer is only paying additional monies to use a lawyer and it isn't necessary. Most people don't realize that it is something that they can do on their own, and people like to perpetuate the fear that they must have a lawyer or they will get screwed. Totally false.

Can we please stay on track to helping Matt with his situation? Thanks.

James,
"As far as never having a customer pay a contribution, good for you, but my bank does not allow that in most situations. If we are going to forgive a customer of 100k in debt, they can and should contribute something towards their obligation."

Please tell us which bank do you work for?