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Short Sales

Idaho Deficiency Judgments and Anti-Deficiency Laws

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Question: I know that Idaho allows Deficiency Judgments. I’ve heard that Idaho also has Anti-Deficiency laws and that they apply only to 1st mortgages on a primary residence. Is this true? What criteria needs to be met to be protected by the anti-deficiency law in Idaho?

Answer: – It’s so hard to say because every state is different. Typically states with anti-deficiency laws apply only to 1st mortgages, and it must be your primary residence. It may also depend on what type of loan you have. In Arizona, despite the anti-deficiency law, if it’s a VA loan, they can file a deficiency judgment. In most cases throughout the U.S., lenders very rarely file deficiency judgments on 1st mortgages, they just take back the collateral. Lenders in 2nd position are more likely to file deficiency judgments because they are the ones taking the biggest losses and they have no way to re-coop their losses because the first took the house. And even still, most of them will 1099 the homeowner. One of the best things you can do is have someone negotiate a short payoff or a short sale on your home and have the lender agree to a “satisfaction” which means the lender is giving up their right to go after the homeowner for the deficient amount. If they only agree to “release the lien” then they still have their right to file a deficiency judgment.

Short sale and release of lien

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Question: Close to signing a short sale agreement between my first(Countrywide) and second(WAMU). this is a rental, Countrywide has settled, second will accept $7000 to release the lien, however they still want to come after me for the $93,ooo balance. Broker(advocate) was told that WAMU has already charge of the second as bad debt. Can WAMU sell the note to a collector that will still come after us for the full 93,000K. Been advise to try to settle with wamu at an agreed amount and make $100/MONTH PAYMENTS TO LIMIT LIABILITY. Any other questions to consider? If the house goes into foreclosure, Countrywide does a trustee sale are we finished with wamu too?

Answer: The best thing you can do is ask for a satisfaction of the loan. Ask them how much they need to “satisfy” the loan. Typically you’ll have to pay more for a satisfaction of loan, but they give up their right to come after you for the difference. If they’ve agreed to “release the lien” then yes, they can and usually will come after you for the difference. If the home goes to foreclosure, you can bet WAMU will file a deficiency judgment because it sounds like that is what they are planning to do anyway. So, no, you are most likely not finished with WAMU. The best thing you can do is try to get them to accept a satisfaction. Good Luck.

What questions should I ask before making an offer on a short sale?

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Question: What questions should I ask before making an offer on a short sale?

Answer: – I hope I understand your question… You want to ask as many questions as you can to help you identify what the property is worth and their motivation. I like to start out with some basic questions to get a feel for the property, then ask additional questions when I show up to the property. Here are some you can start with.

  1. Are you the owner?
  2. What’s the house worth?
  3. How did you get to that price?
  4. What do you owe on the home?
  5. How many payments are you behind?
  6. Have you received a NOD?
  7. Has the lender set an auction date?
  8. What do you want from your home?
  9. What’s the address of the property?

Now go verify the information they gave you and see what it’s worth to you.

Who is responsible for the difference of the original loan amount if a short sale is accepted?

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Question: Who is responsible for the difference of the original loan amount if the property is redeemed by the mortgagor, or if the property is sold in a short sale? Who is responsible for the difference? The money lost on the original loan?

Answer: -The individual(s) who signed on the dotted lines and promised to pay the loan back are responsible for the difference. The lender has the option of doing nothing and counts it as a loss, or they can 1099 the homeowner for the difference, or they can file a deficiency judgment against you for the whole amount. If they file a deficiency judgment against you, the only way to get rid of it is to file bankruptcy or pay it off. If they 1099 you for the difference and count it as income, you can fill out a form (982) the IRS has that (in most cases) will counter the 1099. So really all you have to worry about is the deficiency judgment. And a good short sale expert knows how to avoid that so it’s rarely an issue. Most of the time they just 1099 you for the difference.

when buying a short sale home how long does it take to close?

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Question: when buying a short sale home how long does it take to close?

Answer: – If you are the end buyer, the time it takes to close varies depending on how ready you are. It can take 3 days to 60 days depending on where you get financing and what they require. The transaction is the same as any other residential home. Typically with short sales, you’re just getting a better deal. You should be able to close within 30 days which is usually what the banks require once the short sale as been approved.

Closing short sales and finding a buyer

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Question: When closing short sales and finding a buyer in 30 days or less, are you using a land trust to avoid the seasoning issues or are you double closing in your own name? How do you avoid the seasoning issues?

Answer: -It’s becoming harder and harder to perform a double or simultaneous closing because of all the mortgage fraud going on in the lending industry. However, there are a few title companies still around in certain states that will do this for you, you just have to find them. The land trust is used to provide added protection and helps in avoiding the due on sale clause. So using a land trust is beneficial even if you can’t perform a double closing. The most common seasoning issues come when you buy a piece of real estate for $100,000 one week and sell it for $200,000 the next. They begin to wonder how it doubled in price so quickly and you or your end buyer may have to explain that you got a good deal.