Who really knew the word “shortsale” before the events in the real estate market in South Florida and nationwide in the last six months ? Not too many of you, I bet.
Selling your home for less than you owe on it has become a harsh reality for many. I have recommended it to clients as it does have benefits for the sellers and the bank. The seller avoids having a foreclosure on their credit report making it much easier to be able to buy a home in the future. The bank does not have to continue the costly process of foreclosure which costs an average of $ 58,000 per property AND they do not have to take the property back, repair it, maintain it and have it show as a gaping loss on their balance sheet!
Going forward, I think banks will be more and more likely to avoid actually foreclosing on the property if there is an alternative. As the article states, make sure you get a full release of all your obligations to the bank. Most people do not realize as they are signing the loan documents that, if the bank’s debt is not fully repaid, they can get a judgement against you for their loss.
Unfortunately, if you have other assets that were stated on your loan application, it may be harder to get a full release of the debt from the bank as they may look at your other assets to make up the difference between the short sale and the amount you owe them. I think banks are very likely to start looking more and more at getting deficiency judgments as their losses increase over the next few years. What does that mean for you: when you start to come out of the financial hole and make money again, you have to pay the piper as there will be a judgement against you.