BANK RELEASED LIEN BUT WILL NOT FORGIVE THE DEBT

Your recommendation should be to immediately seek the advice of an attorney. Do not make these recommendations yourself. State law varies. Their situation may vary from another. In a non-recourse state, if this is a non recourse loan an attorney may tell them they're fine, but this is not advice we should give or we can be in big trouble :)

Just got done with the Certified Distressed Property Expert course (most excellent, by the way). Found that this type of language is appearing more and more. Especially with second mortgages that are getting hit real hard.

It is recommended that approval letters be reviewed by an attorney knowledgable in foreclosures and short sales. Asking that this language be removed is always easier when coming from an attorney.

And that makes sense. Also it takes the burden off you as the agent. You can still negotiate this. Show Chase the costs of foreclosure vs the shortsale. If your client has no money to give, let them know. At the same time understand that something may have to be brought to the table.

I will presume you are in a deficiency state. If so, one thing to remind the seller is that the deficiency only gets worse if there is a foreclosure.

All parties may have to give on this one. Even the buyer and agents.

I am in the midst of a short sale with Chase just now, and they have the same verbiage in their approval letter. They will report on credit that the loan was paid, but not in FULL (actually it said infull) and that they would continue to seek deficiency from the Seller.

Now I've been in touch with this seller who lives in CA, house is in FL, for THREE years. If he had done what I told him THREE years ago, then he would not be in this boat. But no, he rented the house, to 6 foreign exchange students who all had differing schedules as far as work or school, and none who spoke English, so we could not show it.

Fast forward.... they moved.

So he lists the house (with another agent) for more money than all of God's angels could get him and after no offers in 4 months and only 1 showing, sucks it up and calls me back. By now our market is A LOT WORSE than 3 years ago, so when I give him the 30-60 day sales price he is in mortal shock. Says he needs to talk to his attorney, who advises him to file bankruptcy. My advice to him was he could do that, but the derogatory credit would last longer, and they would still seek deficiency judgement, so either way he loses, but what do you want to do, lose a LOT, or lose a little and get it over with. I then advised him to seek counsel from a 2nd attorney, one who specializes in short sales and foreclosures.

So here we are, less than 2 months later, contract in place, due to close on Oct 23rd. He says he wished he'd listened to me 3 years ago. I feel a good testimonial letter coming on ;-)

The moral of the story? Each State has different laws.
Get a real estate attorney on your side that you know is good at short sales and foreclosures to refer these people to so they don't just talk to anyone. An attorney who specializes in estates or wills and trusts is not qualified to give advice on short sales and should tell these people that, but I guess they don't want to turn down the money, right? Just like a lot of agents who should be referring these deals out because they don't know what they are doing either.

It's a bad place to be in either way.

Don't give advice unless it's to seek qualified counsel is the best advice I give (with emphasis on QUALIFIED - which is why you should find an attorney to refer business TO, right? I would rather not be involved in a transactiion than be involved in a lawsuit. No commission is high enough to lose your license over and more importantly, remember the Golden Rule...if you didn't know anything about a short sale, would you want someone 'winging it' on your behalf?

Hey, that's why we get paid the 'big bucks' lol! Translate that commission into a dollar per hour cost and we make less than minimum wage...but I sleep well at night.

I have the same situation in Washington state.The lender sent the seller a letter saying that they would do a short sale if he signs a promasory note.That does NOT help the payment situation for my client.He is in the Army so they can come after him if he doesn't pay ,right?

William, you need to find out if this is a fannie or freddie loan. Not sure if your client is the buyer or the seller, but in any case there are special exceptions for people in the Army.

If your client is the buyer, then you have no problem...the promissory note will only be between the seller and lender.

If your client is the seller, you need to get the info on Army exceptions. If the listing agent doesn't know this, then they should get the info. I don't have that info right at my fingertips, but recall reading it somewhere in the Fannie Docs.... I'm sure Freddie is the same. A call to one of them might be all it takes to clear this up. It may be only regarding taxes, not sure, but there are exceptions for all normal rules for the Military, especially if they are deployed out of the country.

If I run across the info I'll post, otherwise maybe someone else here knows it off the top of their head.

It is becoming quite apparent that the Junior or second lien holders are finding ways to get theirs. They got tired of getting nothing...now they can reserve their right to the Deficiency, go to court, get a judgment against the Seller and promptly sell that debt to a collection company who can be more aggressive in their pursuit of the debt. (this may be more prevalent in certain states, like FL and not so much in CA...for example)

This tactic explains all those lost phone calls, lost faxes and unreasonable demands by the Lenders...in many cases, they can actually get more from a Foreclosure than a Short Sale.

Times have changed...again!

I checked with my attorney and here was his response to this question. No charge today, smiling.

If you schedule the mortgage debt, it would be discharged with other debts…so no deficiency judgment in that case.

Very truly yours,

Robert A. Gilmore, Esq.

The Gilmore Law Firm, P.A.

120 Benning Drive, Suite 1

Destin, Florida 32541

Tel: (850) 650-0546