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 »  DEFICIENCY JUDGMENT

The elephant in the jungle, so to speak, is "Deficiency Judgment." Just what is it - and how can you avoid it? Deficiency Judgment is a judgment for the amount owed less that amount received via a sale, short sale, deed-in-lieu of foreclosure or foreclosure. Each state has separate laws dealing with them so, on this page and site, all reference(s) to "Deficiency Judgment." will reference California. Note that we are not attorneys nor accountants and all information on this site and page and site are not to be construed as legal and/or accounting advice.

"Deficiency Judgment.": what is it - and how can you avoid it?:

The elephant in the room when it comes to short sales and foreclosures is "Deficiency Judgment." Deficiency Judgment is a judgment for the amount owed less that amount received via a sale, short sale, deed-in-lieu of foreclosure or foreclosure. Each state has separate laws dealing with them so, on this page and site, all reference(s) to "Deficiency Judgment" will reference California. Note that I am not an attorney and all information on this page and site are not to be construed nor intended as a replacement for legal and/or tax advice.

In some successful short sales, it is possible to negotiate a full satisfaction of the lien, including a waiver of the right to pursue the borrower for that the deficient amount, no promissory note, and no financial contribution. There are lenders that will give up the right to pursuit a deficiency judgment against the homeowner - but this is not automatic, even if the lien holder agrees to release the lien for a set amount. To complete a short sale, the lender(s) must relinquish their lien(s) on the property, but they don't have to agree to not pursue the borrower for deficiency judgment(s), which could be hundreds of thousands of dollars. (I only use a very experienced law firm to negotiate my short sales: they are experts at parsing the language in short sale approval letters, which are drawn up by attorneys: another reason to call us.) There are some lenders that, as a rule, don't allow a short sale without reserving the right to go after the seller for the amount the home is sold short for (deficiency judgment). You have too much at stake to not have all the facts before beginning the sales process, whether it is a regular sale or a short sale: take the time to speak with your legal and tax expert and your bank.

(Click here for an example of what a short sale approval letter looks like where the Clark Group represented the seller in the short sale, a Newport Beach based law firm negotiated the short sale, and where the lender has agreed to not pursue a deficiency judgment, is not requesting a contribution from the seller, and is not requesting the seller sign a promissory note: this allows the borrower to get a fresh start so to speak. There are many short sales that close in which, due to the inexperience of the negotiator (typically an agent), leaves the borrower (seller) in what is sometimes a worse position than if they had not sold their home in a short sale at all.)

An interesting question was posed during one of our homeowner workshops: does having a loan modification void the protection afforded Purchase Money Mortgage (original loan(s) against a property). Click here for a thread at ExpertLaw.com that discusses just this subject. Bottom line: consult an attorney with any questions about your mortgage (and NEVER use someone other than a law firm to negotiate for you in a short sale). Realtors are licensed to practice real estate, not law and taxation.

Reasons to Avoid Foreclosure:

  • Many current and prospective employers run credit checks: a foreclosure can put a current position in jeopardy. Also, foreclosure is one of the top items that will put a potential new hire in jeopardy.
  • Security clearances, government positions, military and law enforcement, banking, financial services: many employers reconsider security clearances and jobs positions should one be foreclosed on.
  • You could end up with a much higher tax liability in a foreclosure than could result in a properly negotiated short sale since, in most cases, cancelled debt will be higher.
  • Credit: it will be much tougher - and take much longer - to buy a home with a foreclosure on ones record.
  • You may end up with a Deficiency Judgment (the bank may pursue you for the amount you owe less what they received at auction).

Articles of Note from the Clark Group:

Here are articles and websites dealing with short sales, mortgage fraud, loan modification, and deficiency judgment that we found very informative:

Interesting question was posed during one of our homeowner workshops and that is: does having a loan modification void the protection afforded Purchase Money Mortgage (original loan(s) against a property). Click here for a thread at ExpertLaw.com that discusses just this subject. Bottom line: consult an attorney with any questions about your mortgage (and NEVER use someone other than a law firm to represent you in a short sale).

FREE HOMEOWNER SOLUTIONS WORKSHOP:

Our next FREE Homeowner Solution Workshop: date to be determined based on demand. (If you want to speak with us before one of our workshops, please call us at 949-285-1207 or indicate this in the comments section of the below form.) Please complete the below form as our workshops fill up quickly - and seating at our Save Your Orange County home workshops are on a first-come, first-serve basis. Whether you are a homeowner experiencing problems with your current mortgage, about to miss your first payment, or are looking for answers about loan modifications, short sales, bankruptcy, or credit repair, you are welcome to join us at one of our very informative free Save Your Orange County Home From Foreclosure workshops.

On the legal side, we have a relationship with a local law firm that has a vast amount of experience in both loan modifications and short sales, and are now offering legal representation for those considering, or going through, bankruptcy.

The Clark Groups "Save Your Orange County home workshops" are free as is our representation of sellers in a short sale.

Our team also includes a Certified Public Accountant (CPA) who is well-versed in the tax code as it applies to those homeowners either facing or have experienced a foreclosure or sold their home in a short sale, and a credit repair specialist.

Location:

Attendance has been excellent and we have had the privilege of working with many homeowners from our workshops. Interested in finding out more information about our next workshop? Please click here to request information about the Clark Groups Free Orange County Homeowner Solution Workshops

Experience Makes All The Difference

You are not alone: we have worked with many homeowners and understand the stress of what you are going through. The calls, the knocks at the door, the barrage of mail. There are many options available. We are very experienced at working with homeowners that have missed, or are about to miss, a mortgage payment. the Clark Group can help. Call us at 949-285-1207.

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Thanks again for visiting our site. We look forward to helping you with all your Orange County California real estate needs this year.

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