Underwater? Get some A.I.R.
(Answers. Information. Resources.)

Call 480-630-3968 :: Email Us
You are here: Home / What to Watch Out For: Deficiency




 

If I do a short sale or the bank forecloses, can the bank still come after me for the difference between the sale price or fair market value and what I owe? The legal aspects of short sales and foreclosures can get very complicated very quickly. So we can�t go beyond giving you a very general lay of the land here. To really understand the legal implications of your decision given your unique circumstances, you really need to get an Underwater Homeowners Assessment and Action Plan.

What you need to know

  • What a deficiency judgment is
  • The legal differences between a short sale and foreclosure
  • Where anti-deficiency protections apply, and where they donâ��t
  • What a legal opinion letter is and why itâ��s essential
  • How the Underwater Homeowners Assessment and Action Plan can help

Learn the answers to these questions and more here (click the tabs above).

Deficiency FAQs

  • Q: If I choose to do a short sale do I need to worry about a deficiency judgment? (Click to read the answer)

    A: The answer to that question really has two parts. First, you need to know that once you stop making your mortgage payment, even if you are going to attempt to do a short sale, you are on the path to trustee sale (foreclosure). Once you make the decision, there�s no going back. One of the two things is going to happen: you�re going to be able to do the short sale or the bank is going to foreclose. Now, the short sale has some better aspects to it, so if you decide, �I�m giving up this house one way or the other,� understand you�re on that path to trustee sale, and we�re going to make every effort to do the short sale while we�re on that path, but things happen � you could lose a buyer right at the end, the bank could not extend the foreclosure date, etc.

    From that aspect you need to understand anti-deficiency in case you end up in foreclosure for whatever reason. The Homeowner 101 Assessment and Action Plan providers even draw out the timeline of how things generally happen en route to foreclosure: you�ll get your acceleration notice about this timeframe, you�ll get your notice of trustee sale date about this timeframe, then you�ll have 90 days from then until they actually do a trustee sale. Now that�s the worst case scenario � the minimum amount of time you�ll have. We draw that out so we can say; it is within this timeframe that you need to get the short sale done if that�s your decision.

  • Q: What is anti-deficiency? (Click to read the answer)

    A: Arizona (and some other states) has an anti-deficiency law that says that if you have a loan that was used to purchase your home and if your home was sold at a Trustee Sale (foreclosed on by the lender), then your lender cannot pursue you for the different between the amount you owed and the amount the bank received at auction. Note that the anti-deficiency statute only protects you if your house is sold at auction; it does not apply to a deed-in-lieu, a short sale, or any other type of title transfer.*

    *Anti-deficiency laws vary by state. The information provided here is geared toward homeowners in Arizona. It is for informational purposes only and should not be construed as legal advice. For legal advice, please consult with a licensed legal professional.

  • Q: If anti-deficiency doesnâ��t apply to a short sale, what does? (Click to read the answer)

    A: To get a release from liability if you do a deed-in-lieu or a short sale you will have to get a letter from the lender agreeing to release your liability. This is a contract law issue, and the only way to ensure that the bank cannot pursue you for the difference between what you owed and what the house sold for (in a short sale, for example), is to get that letter from the bank.

  • Q: Iâ��m confused about anti-deficiency versus debt relief. Whatâ��s what? (Click to read the answer)

    A: There is often confusion about anti-deficiency statutes � again, a state law that protects homeowners from a deficiency judgment � and cancellation of debt, which is a federal tax issue. Currently, the Debt Relief Act protects many homeowners from tax liability associated with any forgiveness of debt (which will happen in foreclosure, deed-in-lieu, or a short sale).

Deficiency Resources

Homeowner 101 Authorized Legal Advisors

  • Homeowner 101 Authorized Legal Advisors
  • Homeowner 101 Authorized Legal Advisors
  • Other Homeowner 101 authorized providers

Deficiency Laws by State

  • Deficiency Laws by State
  • Deficiency Laws by State
  • Deficiency Laws by State

Tax Liability in the News

  • Tax Liability in the News
  • Tax Liability in the News
  • Get more news

Deficiency Videos

Coming Soon

We�re in the process of putting together a video interview on the issue of deficiency judgments with foreclosures and short sales. Stay tuned!

Watch other videos

Take Action!

Whether you decide to do a short sale, or a deed-in-lieu of foreclosure, or a strategic default, the day you stop making your mortgage payments you start down the path to foreclosure. If the short sale or deed-in-lieu doesn�t work out, then your house will in all likelihood be foreclosed on by the bank. It�s critical you be aware of that before you make your decision.

Also, if you do a short sale you need to get a letter from the mortgage holder releasing you from all liability associated with the mortgage debt. Otherwise, the lender could come after you for the difference between what you owed on the mortgage and what the house sold for. It is essential that you work with a professional to ensure you get this full release of liability.

If the bank forecloses, in some states (like Arizona) you are protected from a deficiency judgment (when the bank comes after you for the difference) by anti-deficiency laws. In other states, the bank can come after your other assets even after foreclosing on the house. Again, it is essential that you work with an experienced professional to understand whether you might face a deficiency judgment.

With the Underwater Homeowners Assessment and Action Plan that�s exactly what you�ll get � a one-on-one consultation with a professional who can help you navigate all of this.

Learn more about the Underwater Homeowners Assessment and Action Plan


Page Tags: deficiency judgements Chandler | home deficiency judgment Chandler | foreclosure judgment AZ