Ann Arbor folks, I have heard this before from a few of my Short Sale sellers…“We will just let it go into foreclosure” if the bank pursues a deficiency judgement.
If a bank doesn’t release their right to pursue a deficiency judgement at the Short Sale letter of acceptance; they can still pursue it at foreclosure.
So saying NO to a bank if they ask for it, or don’t mention it is silly.
Now in saying, this we always ask for it be removed, and negotiate for it to be done. But, I am seeing this happen less and less.
In Michigan by law the deficiency can be pursued anytime during 6 years.
As a Northern Virginia Short Sale Agent, I come across Sellers all the time that think if they can’t get their mortgage holders to agree to a Short Sale under the Sellers’ terms, then the Sellers will, “Just let it go to foreclosure.”
This often comes up if a mortgage company is asking for a cash contribution, or if they are retaining their rights to pursue a deficiency judgment for the unpaid mortgage balance. Here comes the refrain again, “We’ll just let it go to foreclosure.”
FORECLOSURE IS NOT A GET OUT OF JAIL FREE CARD!
If your mortgage holder is reserving their rights to pursue a deficiency judgment against you, why on earth do you think letting the property slide into foreclosure is going to change that? At that point, there are attorneys fees and other legal costs associated with foreclosing that are now tacked on to your unpaid mortgage debt. Do you honestly think the mortgage company is going to forget about you and NOT pursue a deficiency judgment when you have just cost them even more money?
Short Sales offer a bit of control over determining certain terms with the mortgage holder. For instance, cash contributions can be negotiated to a more affordable amount. Sometimes, they can be negotiated away entirely. It depends on the individual situation.
The important thing to know is that foreclosure doesn’t magically wipe the slate clean and let you off the financial hook. Unlike a Short Sale, you just don’t see what’s happening until the judgment has been leveled and your paycheck is being garnished, or a lien has attached to other real estate you may own.
What a mortgage holder can do when pursuing a deficiency judgment against you for unpaid mortgage debt is determined by state law, so it is advised you speak with an attorney if you find yourself facing a less than desirable Short Sale outcome. The foreclosure outcome may not be as rosy as you think when you hear the legal ramifications.
Chris Ann Cleland, Associate Broker- Licensed in Virginia, GRI, SFR, Northern Virginia Short Sale Specialist. Affiliated with Long & Foster, 7526 Limestone Drive, Gainesville, VA 20155. To contact Chris Ann, call 703-402-0037 or email chrisann@LNF.com. Or you can visit her website: www.nvarealestate.net.
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