There has been quite a bit of talk about doing short sales, but we must make sure that we are trained in all aspects before claiming to know this part of the business. Yeah, I once thought it was as simple as writing a hardship letter, sending in financials and submitting an offer and the bank will jump on it. Not so. And even if it was that simple, we must still inform our clients of the possible financial affects of short sales and possible ways to avoid these affects (insert the word 'attorney' here).Thought this was a good read about lenders possibly pursuing deficiency judgements, many times after the homeowner doing the short sale has recovered financially. Here's the link:http://finance.yahoo.com/news/Mortgage-lenders-pursue-cnnm-3107909798.html?x=0
It is vital that we fight the bank to get not only the lien released but also the debt. In the case where the lender refuses to release the debt, we try to get something in writing from themstating that they will 1099 the borrower.
If they 1099 them, they give up their right to pursue a deficiency judgement (at least in CA).
I think it is obvious. All my clients are told upfront that there is a possibility of a deficiency judgment, especially if there are two loans. All are advised to contact an attorney specializing in distressed properties and a CPA. before they even list a short sale. They have to make an informed decision and be aware of the consequences.
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If they 1099 them, they give up their right to pursue a deficiency judgement (at least in CA).