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What to say and do when seller refuses to sign deficiency note

Posted by Silvia Dukes on January 27, 2010 at 1:38pm
Second lienholder in this short sale situation is Wachovia requiring seller to sign deficiency note as a condition to release the lien on the property.Seller now states that she won't sign the deficiency and go to foreclosure and then file for bankruptcy.I have asked seller several times to seek legal advice throughout the process and she states that she has "spoken to someone about the deficiency note and was definitely advised against it. He told me that if the house does go into foreclosure because the lenders will not accept the short sale terms, then he advised me to file for bankruptcy"Besides the fact, that I don't know how qualified a person she spoke to, this doesn't make much sense to me especially the part of the "lender not accepting the short sale terms" as it seems to be the borrower who is not accepting them.What else can I say or do so she will proceed? Even after foreclosure couldn't the second lienholder still file for deficiency judgment? The mortgage document states that nothing shall impair lender's right to a deficiency judgment in the event of foreclosure against the borrower.Needless to say, there's been a lot of work and patience involved in getting to this point. Any comments and suggestions are appreciated. Thank you!
Tags: bankruptcy, deficiency, foreclosure
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Comments

  • kathleen shaffer April 16, 2010 at 8:01am
    i was told that regarding a second pursuing a DJ, have the borrower contact them after the short sale closes and negotiate a settlement.
  • Vanessa Calhoun February 4, 2010 at 3:08am
    I've had this occur on a BofA short sale in which the investor asked for a note. My client signed it....then filed for bankruptcy after the fact.
  • Kevin Vitali January 30, 2010 at 2:03am
    Well if she signs now with the second. I am presuming she has the first off her back for a deficiency judgment. Regardless there has been some progress made. Secondly if the second files even after a short sale she can still go into bankruptcy. Your seller needs to see the big picture, maybe the terms isn't exactly what she or he wants but it is still better than a foreclosure. You've eliminated action from one lien holder and she still prevent a foreclosure on her credit score.
  • Silvia Dukes January 29, 2010 at 10:40am
    Pamela, interesting article. This is not a case where the second lienholder is asking for cash outside the HUD which I would never agree to anyway.

    They are releasing the lien from the property but they are not forgiving the debt and trying to collect it later.
  • Silvia Dukes January 29, 2010 at 10:25am
    Bryant, thanks, I agree with you in every point. I don't understand why someone would want to file for bankruptcy before the fact so to speak, but then again, I'm not an attorney neither.
  • Bryant Tutas January 29, 2010 at 10:15am
    Requiring the seller to sign a note on the 2nd is quite common. If the property goes to foreclosure they can still go after the seller. As long as the note is reasonable and the seller can afford to pay then it makes sense to sign and move forward. They can always file bankruptcy after the fact if that's what they choose to do.

    But of course.....I am not an attorney nor to I play one on TV. This answer is nothing more than my opinion.
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