“What are deficiency judgments?”

If you are struggling with making your mortgage payments or are already in default, you may be considering a short sale, which is where your lender/lenders may be forgiving a portion of your outstanding loan balance in order to execute a short sale as  opposed to letting it go into foreclosure. Let’s say your loan balance with your first lienholder is $300,000, and current market value of your home is $240,000. With closing costs and commissions, if the lender approves a short sale they’ll be forgiving MORE THAN $60,000. A deficiency judgment is where the lender attempts to come after you for the balance of the forgiven amount at a later date. Generally, lenders will not seek a judgment if it’s the primary residence, or if it’s been refinanced and there has been no “cash out” on a 2nd mortgage or line of credit. Even if they do seek a judgment, it may not be a legitimate lien, depending on your circumstances. Our team recommends you seek advice from a CPA or attorney who is short sale savvy. If you are considering a short sale, be sure to ask the agent you’re interviewing how many they have successfully negotiated. It is in your best interest to work with an agent who knows the ropes and has some solid experience under their belt.

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