Is A Short Sale Better Than A Foreclosure Part II?
In part one of this blog I discussed why a short sale is better than a foreclosure. What can one do to try to avoid having to experience this nightmare? Short Sale the property! A successful Short Sale can result in a win-win scenario for all parties involved. A Short Sale is an opportunity for the Mortgagor to try to prevent any version of the foreclosure nightmare while trying to actively mitigate the losses for all involved. A successful Short Sale handled by a Real Estate Attorney may result in the Bank or Lender releasing the lien of the Mortgage and also canceling (forgiving or writing off) the Promissory Note and providing a full release of their deficiency judgment rights. The best outcome of a Short Sale is the issuance of a 1099C which will be discussed in future blogs.
Most states are not as friendly to debtors as Florida. For example, if one were to move to California, and a money judgment had been obtained in Florida and then domesticated into a California judgment, the creditor shall then collect on the judgment in accordance with California law. A California attorney explained to me that California is a homestead state. So is Florida, so the new home purchased when the relocation occurred after “walking away” from the Florida home should be protected since it is homestead, right? Wrong! But wait, California was chosen because it is a homestead state and is not a deficiency judgment state. Two problems here: (1) the homestead protection means creditors can force the sale of the California homestead to collect on the judgment, but the Debtor is permitted to keep the first $50,000.00 and (2) California does not permit deficiency judgments to be obtained as a result of a foreclosure on California property, but that does not provide a California resident with protection against a creditor collecting on a deficiency judgment obtained from another state which was subsequently domesticated into a California money judgment.
This sounds like a really bad nightmare. It gets worse. When the Banks and Lenders became inundated with defaults, they scrambled to put processes and procedures in order to try to handle “saving their collateral” so it could be liquidated as soon as possible by commencing foreclosure proceedings. Remember, Florida is a deficiency state and there is a five year timeframe. One might say we are only three years into this mess. Banks and Lenders are waking up. Three years ago a Short Sale negotiator had no clue what a deficiency was. Now, they make statements such as, “oh you are in Florida, which is a deficiency state”. Rest assured that many of those people, who chose the “walk away” road, may very likely be caught by surprise when the process to obtain the money judgment is commenced 4 years and 11 months from the foreclosure sale. Won’t they be surprised when wages are being garnished due to the money judgment obtained by their Bank or Lender or even the debt collector who has been hired by the investor who purchased the Promissory Note for pennies on the dollar after the foreclosure sale.
">Short Sale vs. Foreclosure? Short Sale should be chosen every time. Actively try to mitigate your losses. If you are in foreclosure, please call the Dellutri Law Group to speak with an attorney who will be able to discuss your options. Most Borrowers in foreclosure can proceed with a Short Sale and most of the time it is not too late. The Banks and Lenders welcome the Borrower controlling the process of liquidating the collateral for them. It is considered one less property that may have to go back into their inventory (if it doesn’t sell on the courthouse steps) which would then require maintenance and carrying costs. Also, if it results in a successful Short Sale, it is one less “bad asset” than can be taken off of their books.
This Blog was written by Annette Giardina Haber, Esquire, of the Dellutri Law Group, P.A. Ms. Haber runs the Firm’s Real Estate Department and concentrates her practice as a real estate transaction attorney. She represents clients through loss mitigation options, drafts contracts, issues title insurance and handles residential and commercial closings.
