What Are Deficiency Balances?
If you want to sell your home for less than the amount of the mortgage, you may be able to do that by means of a short sale. With the permission of the mortgage lender, you can sell the home at today’s value, which is less than what is owed on the mortgage. The difference between the amount owed on the mortgage and the amount approved in the short sale is called ‘the deficiency.’ For example, if there is a mortgage of $250,000 and the home is sold of $200,000, the difference of $50,000 is the deficiency balance.
One of the chief concerns of short sale sellers and distressed borrowers considering listing their homes as a short sale is whether the lender will sue for the deficiency balance after the closing. Short sale sellers almost always ask about this and it is a very important topic to address prior to listing the property. It is vital that all parties—agents and sellers—understand the legal consequences of a short sale, which may differ from state to state.
Will a Short Sale Lender Pursue Deficiency?
Just like the question as to how many licks it takes to get to the center of a tootsie roll lollipop, the world will never know for certain whether the short sale lender will actually pursue deficiency. That’s why it is imperative for distressed borrowers to consult an attorney prior to selling their home in a short sale. While I cannot predict what may happen in the future with respect to the short sale lender and the deficiency balance, there are a few things that can assure that the lender will not be able to pursue deficiency after the closing.
Three Ways to Avoid Deficiency Judgments in Short Sales
- Anti-Deficiency Statutes. In California and some other states, there are anti-deficiency statutes that protect most short sale sellers from any liability for the deficiency balance after the closing of a short sale. California’s law dates back July 15, 2011, so most California short sale sellers with closings on or after that date may be protected from deficiency by this statute.
- The HAFA Program. The Home Affordable Foreclosure Alternatives Program (HAFA) is the U.S. Treasury program for distressed borrowers that want to participate in a short sale or deed-in-lieu of foreclosure. One of the best benefits (aside from the $3000 in relocation assistance) is that the lenders right to pursue deficiency is waived for all short sales approved through this program.
- Language in the Short Sale Approval Letter. No matter where you live, in order to get a short sale closed, you need to receive an approval letter. The text of the letter spells out in no uncertain terms what the bank plans to do after the closing. So, read carefully. In those letters, there may be a sentence that states something to the effect of “We reserve the right to pursue deficiency.” This is dangerous language, and anyone negotiating short sales should be advised to return to the lender and negotiate a revision or deletion of this sentence.
Deficiency Lawsuits – Agents, Be Careful
I was recently involved in conversation where another agent told me that his past client’s lender was now trying to pursue the deficiency. He was so surprised because he said that he never believed that the banks would do that, yet this same agent did not arrange for the dangerous language to be removed from the approval letter.
Agents, you need to tread very carefully in this area. Since you never know what may happen in the future, it’s always best to cross all your ‘t’s and dot all your ‘i’s. Agents from states that do not have anti-deficiency statutes need to carefully read the short sale approval letter when it arrives, share it with the sellers, and have the sellers hire an attorney to review it.
Don’t get so excited about a potential closing that you lose site of the fact that the seller could be sued! Make sure that the language in the approval letter adequately protects all parties. If you thought the short sale was long when it took six months to get approved, just wait to see how long the lawsuit will be!
Austin tops the list of best places to buy a home
When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?
Looking at the bigger picture
(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).
That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).
They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.
“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”
Average age of houses on the rise, so is it now better or worse to buy new?
With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.
The average home age is higher than ever
(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.
With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.
Prices of new homes on the rise
Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.
Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?
The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.
Why Realtors are vulnerable to these rapid changes
(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.
Note: We’ll let you decide which company plays which role in the image above.
So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.
1. Zillow poaches top talent, Move/NAR sues
It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.
Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.
2. Two major media brands emerge
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