There are a lot of folks who just don’t feel right about walking away from their homes and mortgages. They cut a deal- but they just can’t make the payments any more. Rather than resorting to “jingle mail” and just mailing in the keys, they go through a “short sale”. A short sale is when the lender agrees to take less than the amount owed.
A short sale can be a real trial for a homeowner. It’s bad enough trying to sell a home in this market without the added grief of needed a lender’s permission. Imagine how frustrating it is then for the homeowner who’s tried to do everything right, then finds themselves with an added bill- a bill he wouldn’t have seen if he’d just walked away. (Thanks L!)
Short sales, unlike foreclosures, are not typically covered by Arizona’s anti-deficiency law.
That law protects most distressed homeowners if lenders foreclose. It bars lenders from seeking payment from the borrower if the home doesn’t sell for as much as the amount owed on the mortgage.
Some lenders apply the same protection to borrowers who complete a short sale.
But a growing number of former homeowners in metro Phoenix are receiving unwelcome calls and letters from lenders or collection agencies telling them they still owe on mortgages for houses they no longer own.
Because the short-sale concept is designed specifically to help homeowners avoid having to pay their lenders more money, some sellers have been careful to negotiate their deals so the lender, by contract, can’t later seek payment. Those who haven’t done so are at risk.
Just a heads up to short sellers. As in all contracts, READ the darn thing before you sign it. If anything is not clear to you, or you don’t understand your state’s foreclosure laws, contact an attorney. It is better to be safe than sorry.