Deficiency Judgement Fear <-- Overcoming

Howdy from Kentucky,

I am dealing with a family who just pulled out of a Short-sale because they finally got the idea of a Deficiency Judgement.

I tried to explain to them that it’s rare a bank goes after someone for a deficiency but their take is “We just want to walk away and not have to worry about it”. Great, so I explained the fact that if the house goes to sale and it doesn’t get bid up to what is owed, they STILL owe the difference, if the bank decides to go after them. I also told them the only way to be free and clear is to pay off the loan in full.

Lastly, they said that they’d rather take the risk of letting it go to sale and be bid up higher than my short offer would be so they at least owe less than if I were to buy it.

Does anybody have any ideas, statistics, or facts I can use to help keep this deal alive?

I have no stats on the percentage of banks that file deficiency judgements, but here’s one factor the family perhaps hasn’t considered:

They are comparing apples to apples when looking at your SS offer amount and their speculated auction selling price. This is wrong. What they are forgetting is that if they let you do the SS, then their credit will be saved. If the house goes to auction their credit will be shot. Foreclosures are a larger black mark on a credit record than bankruptcies, so be sure and tell them that…

Of course, if their credit is already in the cellar, then it’s a moot point and you should move on to the next one…

I had no idea a foreclosure was worse than a bankruptcy. That’s the first I’ve ever heard that.

I’m going to put the clause in the offer to the bank stating that offer is contingent upon bank not going after a deficiency. The biggest of their problems will probably be the taxes from the 1099. We’ll see.


Any other thoughts on how to present this from others?

push comes to shove you can negotiate the deficiency anyway.

usually it is a no interest and non secured.

we had one and we short saled the deficiency from 50k to 15k over 15 years it was about 80 buck a month. it was well worth it for them to save their credit.

You can also ask the lender to report this to the credit bureau to reflect payment history.