If there was a way to put a dollar in the piggy bank for every question we are asked about recourse loans and what the lender is going to do in the future….well…let’s just say we could afford some great dinners on a regular basis!

Being Real Estate Agents specializing in Short Sales we have to be diligent to help educate our clients to all aspects of their options.

Ultimately, we tell our clients to contact tax attorneys, and real estate attorneys to find out answers to questions we just do not have the expertise to discuss.

Now,  with this said, I myself have asked many attorneys specifics about the ramifications of Short Sales and the ramifications of Deed-in Lieu or a Foreclosure.  From my understanding, a lender is just as likely to obtain a “Deficiency Judgment” if the homeowner opts for a Foreclosure or Deed-in-Lieu.

I’ve also been told by attorneys that in most cases, a Short Sale is more favorable to have on your credit report than a Foreclosure.  Especially if your employment is in the defense industry, homeland defense, Securities such as a brokerage house or Stocks.   A Short Sale reflects that you worked something out with your lender, showing responsibility.

When it comes down to it…we refer our clients to attorneys for any legal or tax questions.  What we are finding is that Attorneys are unable to answer the questions asked by our clients as we are in an evovling market and the questions being asked are just that “new” with no track record to follow.

Are you at risk of a deficiency?

If you’re going to foreclose…then you will get hit with a deficiency for the entire amount of the loan/s.

If you’re doing a Deed in Lieu…then you will get hit with a deficiency for the entire amount of the loan/s.

Short Sale may render you a deficiency for only the amount not covered by the Short Sale agreement.  A big difference from the entire amount of a judgment. Often times a DJ can be negotiated out as an option of acceptance to a Short Sale.

What can you do to help yourself?

Find out if your loan is a “non-recourse” loan. It will be located on your “Note” that was given to you are date of purchase. If unable to locate ask your lender for a copy…some banks charge a fee…some don’t.

If so, does your state recognize the recourse process? California does not if it is a “purchase money note.”

When it comes down to it.  Protect yourself and your unique situation, do what you must to move forward.