What can happen to a borrower’s other property as a result of a short sale?
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What can happen to a borrower’s other property as a result of a short sale?
I am trying to do a “short sale” on my house in VA. If the bank accepts a contract for less than amount owed by me now, do they have any rights to my home in FL?
Asked on August 17, 2011 Florida
Answers:
M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
This is not a yes or no question that needs to be answered here. Let me explain the best that I can. In a short sale what you have to worry about is the deficiency judgment, which is the difference between the amount on the mortgage and the amount of the sale price on the house. There is usually a negative amount which is why the bank must approve the sale (they would not care if they were getting the mortgage paid off). What you need to make sure in a short sale is that the bank waives the deficiency, otherwise they come after you for it. Then the question becomes, can they put a lien against your home in Florida by filing the judgment from Virginia? The answer may in fact be yes, depending on the amount of the deficiency. Florida has a homestead exemption against unsecured creditors. Please seek legal help with the sale and the rest. Good luck.
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
With respect to the short sale of your home in Virginia, assuming the loan is purchase money (meaning the orignal loan when you bought the home), most likely your state has anti-deficiency laws precluding the lender in a first secured position from suing you for any deficiency on a short sale.
If your loan on your home is a refinance, you need to make sure in a written agreement with the lending institution holding the loan that if it accepts the terms of the short sale where it will not receive 100% owed it if the short sale closes, it will not be looking at you for any deficiency.
California recently passed a laws stating that the acceptance of any lending institution of money from a short sale transaction precludes it from going after the property owner for any short fall.
If there is deficiency claim by the lender on your Virginia property's sale and a deficiency judgment is obtained against you, the lender on the Virginia home could possibly record an abstract of judgment on your Florida property.
You should consult with a Virginia attorney regarding the short sale issues of your Virginia property.
Good luck.
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