Short Sales and Foreclosures: The Aftermath

We are seeing the economy take a toll on everyone that you can imagine. People are loosing their jobs in record numbers. As a result we having been seeing a spike in foreclosures and it looks like there will not be a change in the trend any time soon. There have been a number of programs which have been put in place to help those facing foreclosure. Unfortunately these programs have not been able to help everyone facing foreclosure. When a foreclosure starts the homeowner is now faced with a situation where they have to find another place to reside. Most likely this will be some type of rental unit. Some are even flocking to the home of relatives.

With the economy as bad as it is we are seeing more and more companies facing consumers who are about to lose their home. In order to off set foreclosure some consumers are turning to short sales. Everyone who is looking to pursue a short sale is not past due on their mortgage. Some are not facing a financial strain at all. They have discovered that the amount owed on their home is more than what they can sell the home for. With a short sale you have to prove that your home cannot sell for the amount that is owed. When a short sale goes through there is a chance there will be a deficiency balance.

A lot of debtors think that they will be free from the debt after the short sale and the deficiency balance will be written off as uncollectable. Lenders are requiring debtors to sign a promissory note for the balance remaining and in a lot of cases this can be substantial.

It's a good idea to try and negotiate with the lender about the deficiency balance before the transaction goes through. Sometimes you can get a lender to settle for a portion of the balance remaining and not the entire amount. You should get clarity about your transaction right in the beginning. Taking on a deficiency balance can really set you back. Lenders will always tell you that they can not do anything about the deficiency balance and you must pay it. In a situation such as this it would be to your advantage to negotiate for as little as possible when it comes to the deficiency balance. It does not hurt to try. You may be able to get the entire balance waived.