As I speak with different real estate agents and Pasadena home sellers considering going through a short sale process, I realize that there's a huge amount of disinformation. We all know that information is KING and lack of information can be disastrous especially to your financial health.
In my previous post about short sales, I've defined and explained what a short sale is.
Today, I'd like to address the biggest misconception that could affect you, the seller, who is in the middle of a short sale with the bank.
Once a bank accepts and agrees to a short sale, your debt (the difference between the negotiated amount accepted by the bank and the amount owed) is forgiven.
This is absolutely NOT TRUE!
The bank can and will go after you, the seller, for the difference UNLESS the seller receives a written statement from the bank stating that the bank forgives the debt on the NOTE (or notes if there's more than one - 1st and 2nd loan) for the amount equal to the unpaid portion of the NOTE(s).
Most sellers and real estate agents think that the bank will automatically forgive the resulting debt because California has "anti-deficiency" statues which will prevent lenders from trying to collect their losses. These California anti-deficiency statues apply mostly when the foreclosure takes place. Please refer to a California real estate lawyer for legal advice if you are facing a foreclosure.
Sellers that are going through a Short Sale do that to avoid foreclosure!
So, the morale of the story is:
Protect yourself by ensuring that the bank(s) gives you a written statement with the "forgiveness language".
Work with a reputable and knowledgeable real estate agent or a short sale negotiator who can ensure that this issue is addressed with appropriate legal language and forms.
Consult a California real estate attorney to ensure that you get appropriate legal counsel and advice.
If I can be of any assistance with your Pasadena Real Estate needs, please do not hesitate to email me or call me at (626)629-8439. Thank you!
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Thinking of selling your home? Interested in finding out the current market value of your single family home, condo or investment property? Then call Irina Netchaev at (626) 629-8439 to discuss what is happening in today’s Southern California Real Estate Market.