Help ButtonIn my September 10, 2009 Short Sale  discussion I spoke of 7 hot topics on short sales.  Number three (3) was the “Loans – Foreclosure Debt Recovery”.  I reminded you to know if there is a First – Second – Third Deed of Trust encumbering the home?  Also to know the terms of debt forgiveness.  Have the seller ask the lender, “what are the terms of the forgiveness of the debt?”  Charge Off? Waived? 1099?  Advise the seller to seek legal counsel.  Nevada is a deficiency judgment state, which means a seller can be sued after they have been foreclosed upon.  A second can pursue a foreclosed owner for six years.  By performing a short sale, instead of foreclosure, the one-action rule and the deficiency protections are no longer applicable.  The Seller in a short sale will have a tax consequence.  Sellers in a short sale may also be sued by the lender for breach of non payment of a contractual obligation.  The statute of limitations in Nevada for breach of contract is six (6) years.

The following are some examples of language used by the lenders to deal with debt.  Some are good, some not so good, some BAD.  If you have examples, redact the confidential information, and send them to me at darrenw@americanagrp.com

Example 1 – Not GOOD

In this one, the lender states, “may pursue a deficiency…”  The seller may be sued for up to six (6) years.

BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment received and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above.  In addition, if this loan is covered by mortgage insurance, the mortgage insurance company may reserve the right to pursue the seller for the deiciency based on the terms of the mortgage insurance policy.

What can you do?

Write a letter to the lender. 

Please remove that paragraph and insert language to the effect that all parties agree to release each other for any and all claims”

Recently the Stout Law Firm, James R. Stout, Esq., 4560 S. Decatur Blvd., Suite 201 Las Vegas, Nevada 89103, 702-794-4411 was retained by a client of Prudential®, Americana Group, REALTORS® and such a letter worked to amend to this language on a Bank of America lender short sale.

Example 2 – GOOD

In this one, the lender states, “settle your account…”

This letter is to inform you that Chase Home Finance LLC has agreed to your request for a Short Sale, and will accept a minimum of $$$$$ to settle your account and release the lien(s) on the above-referenced Property.

Example 3 – GOOD

In this one, the lender states, “will be charged off and no additional payment will be required…”

Our Customer(s) agrees that upon the posting of the agreed upon Short Sale amount, the remaining loan balance, if any, will be charged off and no additional payment will be required.  Please note a $0.00 balance will appear on the Customer’s file with the credit bureau as “Account legally paid in full for less than the full balance.”

Example 4 – GOOD

In this one, the lender states, “full and final satisfaction on the first mortgage …”

This letter will confirm our acceptance of the short payoff on the above referenced property.  We agree to accept the proceeds generated by the $$$$ “as is condition” purchase as full and final satisfaction on the first mortgage indebtedness on the above referenced property.

SEE my OTHER blogs on short sales:

7 recent tips  

Demand to Close  

NV Mediation Program and How it Affects Shortsale  

Short sales When Seller Files BK

Click the following for:

IRS publication on how 1099 taxes are calculated, exempt, etc.  

IRS explanation as to taxes resulting from Foreclosure and Debt Cancellation.

Deficiency EXPLANATION

 Taxes EXPLANATION Personal Residence

 One Action Rule EXPLANATION

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