Will Homeowners Owe Money after a Short Sale?

Avoiding a deficiency judgment is critical to effectively fight foreclosure

If you are facing foreclosure or have lost your home already due to foreclosure, you may now be faced with a further financial surprise: a deficiency judgment. A deficiency judgment occurs when there is a difference between what the home sold for and what was owed on the mortgage. Due to the high number of foreclosed homes that banks are sitting on, they are forced to accept lower prices on homes that are already undervalued. This is because they are losing property tax and maintenance costs every passing month as the homes they have taken over sit on the market waiting for buyers.

A deficiency judgment occurs in short sale situations in most states, but there are a number of ways you can legally avoid a deficiency judgment for both foreclosures and short-sales.

Beware the Deficiency Judgment When you Fight Foreclosure

The bank has a right to see a deficiency judgment when the short sale doesn’t net enough money to cover the balance due. Likewise, a deficiency judgment can be sought when a property sells at a sheriff auction for less than the property’s current mortgage.

If there is no equity and the property goes to a sheriff’s sale, the bank may receive less than what was originally owed on the loan. At that point, the bank can pursue a deficiency judgment or issue a 1099.

When negotiating a short sale, you can require that the bank waive its right to a deficiency judgment. If the deficiency is waived as contingent to a short-sale, the homeowners will receive a 1099 which may affect a homeowner’s income tax. In most cases, when a homeowner has had limited income for some time, the 1099 won’t affect their taxes. An experienced attorney with knowledge of mortgage foreclosure law will be able to best help the homeowner navigate these sticky issues and help them move on financially.

Challenge the Lender’s Fair Market Value with Help from A Foreclosure Defense Team

One method to avoid or eliminate a deficiency judgment during or after foreclosure is by challenging the bank’s claimed fair market value. Remember that many homes have lost significant value in the last decade and while the bank has a vested interest in keeping the value high, it may not be an accurate value. Plus, the banks have proven to be less than honest – even paying assessors to overvalue homes at times. Seeking counsel of a foreclosure defense attorney is the best way to keep an eye on the valuation and ensure that the home is fairly valued before you pursue an alternative to foreclosure.

  1. Are you struggling to make your mortgage payments?
  2. Want to be sure that you fight the foreclosure properly and get out with your credit intact?
  3. Don’t know how to avoid a deficiency judgment?

Work with an experienced foreclosure defense team who will help you navigate the options. You need not wait until you are hit with foreclosure papers from the bank. Get a head start because the earlier you seek help, the better. The banks are ramping up their efforts to foreclose on many homes. Now is not the time to drag your feet.

Whatever your situation may be, getting the right advice and legal counsel can help you. For a no cost, no obligation consultation and review of your case call a Litvin Law Firm professional right now at 877-829-4104, or fill out the “contact me” form to connect with a foreclosure defense attorney.

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