Be Careful

I have been watching many people get involved in short sales and have observed that many sellers don’t understand where they stand with the banks.

Unless you are a purchase money borrower you can find problems down the road for a long time. Purchase money loans are safe in California (no deficiency judgments are allowed).

However, if you have refinanced or have an equity line of credit, beware. In the middle of escrow the bank may only approve your short sale if you sign a promissory note for some amount of money.

My advice — sign the note if the bank agrees to forgo the deficiency on the balance of the short sale. These notes are rarely for the full amount you owe & sometimes interest is free. TAKE the offer and be done with it.

Upside down home owners are frustrated and don’t always think clearly about this. They just say, “Ok, let the bank have it.” The truth is, the collectors are going to come and a foreclosure won’t stop them. You will still owe the money even after foreclosure.

From the banks position, there is way too much money there to not take action and collect.

Remember, you can only walk away with out any recourse if the loan is the original loan at the time of purchase