Many property owners are attempting to unload their underwater homes through the negotiation of a short sale of the properties with the bank. Short sales can take months — and unfortunately, sometimes more than a year – to get approved by the bank. Often times, property owners negotiate the short sale with the bank themselves, and assume that because a short sale is occurring, the bank will automatically waive its pursuit of the deficiency balance of the loan.
The deficiency balance is the difference between the short sale price and the total amount the bank is due, pursuant to the terms of the promissory note. For example, if a homeowner owes the bank $100,000, and the bank and homeowner agree to a short sale of $20,000, the deficiency balance is $80,000. Do not assume that the bank has waived its right to sue you for the deficiency balance simply because it agreed to the short sale.
A waiver of the deficiency balance must be obtained from the bank, and it must be in writing. Do not rely on a real estate agent or bank representative simply telling you that the bank never pursues collection of the deficiency balance. Policies change. Bank officers change. And the change might not be as forgiving. You may find it helpful to obtain representation of an attorney to either review your short sale documents before closing, or negotiate with the bank on your behalf throughout the short sale process.
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