Today’s trend in short sales is "waiver of deficiency”. A short sale is where a property is sold without enough proceeds to pay off the mortgage debt. A "waiver of deficiency” is what happens if the lender accepts the short sale proceeds as payment in full, and cancels the balance of the debt.
It used to be difficult to get waivers of deficiency from companies such as Bank of America and Chase. Now it is getting a bit easier, albeit not less painful for the homeowner. Typically, a cash contribution or promissory note is required for the lender to issue a waiver.
If a deficiency waiver is not issued, there is a chance the lender will pursue the borrower for the balance of the note after the short sale closes. They may sell the note to a collection agency and might seek all legal means to get the monies owed, including a deficiency judgment in Florida.
Not all short sale sellers want a waiver of deficiency. Some have a higher tolerance for the uncertainty of future collection efforts. I’ve had recent short sales in Destin and Fort Walton Beach Florida where the homeowner states: "I know I owe the money. I will pay the bank later.” or "I cannot come up without enough funds now to contribute to the loss. I will deal with the lender if they contact me.”
Even if a property is sold without a waiver of deficiency, there is a chance the lender may not pursue the homeowner for the balance due. It’s always best to consult with an attorney to discuss your situation. Given options – each seller needs to make his own decision during short sale negotiations.
Wendy Rulnick, Broker, Rulnick Realty, Inc.