After a short sale or foreclosure, homeowners may still owe their lender money in the form of a deficiency judgment. A deficiency judgment is the difference between the mortgage balance and the discounted amount.
A bank can seek a deficiency judgment for the difference between the amount received in the short sale and the amount due on the mortgage. When a home is foreclosed, a deficiency judgment may be issued as a lien against the homeowner when the amount of money made in the sale does not cover the full amount of the mortgage.
What does this mean for the short sale homeowner? Will I, the homeowner, have to pay the difference between the amount I owe on the mortgage and the final sale amount of my home? Unfortunately, there is no definite answer. Each case is different. If a deficiency judgment is issued, it is possible to negotiate with the lender to lower the amount you owe. It may be possible to get your lender to completely waive the deficiency judgment by having them issue a full deficiency release.
At RE/MAX Exclusive Collection, we always seek full deficiency release for our clients. While we cannot guarantee this outcome, we understand the guidelines and procedures that help us protect our sellers from deficiency judgments.
It is important to note that even those homeowners who are unable to get a full deficiency release are still better off with a short sale than having their homes go into foreclosure or declaring bankruptcy. Not only do foreclosures and bankruptcy severely affect your credit for seven to ten years, but you might also have to pay extensive attorney and court fees.
Remember, negotiations are almost always possible. Do not let the threat of a deficiency judgment stop you from considering a short sale. Contact RE/MAX Exclusive Collection to talk to our team of experts We can help answer any of your questions and concerns regarding your short sale or deficiency judgments and to see if a short sale is the right option for you.