We recently closed this short sale and helped the seller avoid a big deficiency judgment. Ed and Cathy bought their house at the top of the market in 2005. It had dropped in value and they couldn't afford the mortgage payment anymore.

We listed the home and started the short sale negotiations with the lender. The lender was a credit union. They were losing about $110,000 on the short sale. They told us that they wouldn't approve the short sale unless the seller's signed a promissory note and agreed to repay them for the loss. We discussed this with the sellers.

They weren't not willing to accept the promissory note. They had experienced a substantial reduction in income and did not see any way they could repay the debt. The bank wanted them to repay $726 monthly for the next 20 years. That may not sound like a lot of money to some of us. But, to Ed and Cathy, it was much more than they could afford.

The sellers told us that if they had no other choice, then they would agree to the promissory note and then declare bankruptcy when the bank tried to collect. We agreed that that was an option. But, we also thought that the bank was being unreasonable. We explained the situation and asked them to approve the short sale and forgive the debt.

Our contact at the bank wouldn't do that. We continued to sell him on it. We explained that this was the best opportunity for the credit union to reduce their losses on this loan. We explained that the only other option was to wait another 6-12 months for the foreclosure case to go through and then sell the home. However, we estimated that would cause the lender to lose an additional $20,000 to $30,000.

They would lose more if the seller declared bankruptcy and the foreclosure case dragged on even longer. Finally, our contact agreed to approve the short sale and forgive the debt. The home sellers were able to short sale and move on with their life with no deficiency or promissory note. Remember, it is a rare situation where a lender will not approve a short sale and forgive the loan. But this is an example of how a good short sale Realtor can help you avoid a deficiency even if the lender does not want to forgive the debt.

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    Thinking about a Short Sale?

    Ashish can help you short sale your property and get back on your feet. Send him an e-mail at Ashish@EastLionInc.com. He will contact you for a free consultation and explain how the process works in detail and answer any questions you may have. Or, if you prefer, you can call him directly at (818) 259-3455.

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