Today’s trend in short sales Southwest Riverside County is “waiver of deficiency”. A short sale is where a property is sold without enough proceeds to pay off the mortgage debt. A “waiver of deficiency” is what happens if the lender accepts the short sale proceeds as payment in full, and cancels the balance of the debt.
It used to be difficult to get waivers of deficiency from companies such as Bank of America and Chase. Now it is getting a bit easier, albeit not less painful for the homeowner. Typically, a cash contribution or promissory note is required for the lender to issue a waiver. This has eased recently as well with SB 458 and litigation against the major lenders.
If a deficiency waiver is not issued, there is a chance the lender will pursue the borrower for the balance of the note after the short sale closes. They may sell the note to a collection agency and might seek all legal means to get the monies owed, including a deficiency judgment in California.
Even if a property is sold without a waiver of deficiency, there is a chance the lender may not pursue the homeowner for the balance due. It’s always best to consult with an attorney to discuss short sale deficiency scenarios. Given options – each seller needs to make his own decision during short sale negotiations.