Short sale judgement

I am working with a seller who’s mortgage company is willing to do a short sale. The house in question was a rental. The seller owns her homestead free and clear.

Aside from the 1099 can the mortgage company put a judgement against the seller’s homestead?


Not unless it’s on the mortgage note.

BUT BUT BUT if you try to SS saying the seller’s broke, but oh, by the way, she owns her house free and clear, the bank’s going to laugh.

Income, debts, and assets on the hardship statement will show it up.

Maybe you should plan for a sub2 instead.

The property in question is a rental property that had a fire in Feb. 2002. Bayview loans is the mortage company that bought the note around the time of the fire. The seller was told by someone at the insurance company that they paid a claim. Bayview says they didn’t receive anything. The seller informed them that she could not afford to pay the mortgage and that they could have the house back. Bayview declined and tole her to find the buyer. She let it ride and finally called me. I explained the short sale process to the seller and she did not want to sign off because of consequences. She backed off and quit communicating. Bayview could only contact her through me.

Bayview has agreed to the short sale and she finally has agreed to it as well. She has her homestead property paid off and is reluctant to sign now if they are going to put a judgement on that.

Any suggestions on how to avoid that. She is 61 disabled and her only income is $3700 a year from social security and food stamps. Her family pays for her property taxes and her transportation.



If Bayview gets a deficiency judgement against her, it could force her into bankruptcy, and if I remember correctly, she can only have $20,000 equity in her home to file chapter 7, otherwise she has to sell it.

This is not legal or financial advice, seek the services of a professional.

Not meaning to take us off topic but what does “The seller owns her homestead free and clear” mean. Then why is there a mortgage? I am assuming I do not know what the term Homestead means. Is that different than the actual building? Please help me to understand.

Thanks for the replies. The seller’s homestead property is different than the short sale property. There is no mortgage on her personal residence (home stead). It is paid for. She has offered for the bank to just take the short sale property back. Deed in lieu of foreclosure or whatever. They won’t and even foreclose after not having a payment in 5 years. The taxing authorities haven’t taken it either although they are very liberal around here. Again the seller didn’t cooperate in the beginning as she was told by someone at the insurance company that a settlement was paid. Of course the person who told her is no longer there. She feels that she should not suffer the judgement as she has asked them to take it back for the last 5 years.

Could she not place her personal residence in a trust?

As mentioned before, this isn’t legal advice. In homestead states, the homestead is not subject to judgements not related to the homestead. So, in a bankruptcy, the person(s) can keep their home.

In your case, since you specifically mention homestead, your state probably has that same or similar rule.

The mortgage company may get a judgement against her, but it will just be sitting there. IF she tries to sell her home, or her heirs try, that judgement may have to be satisfied before/in conjunction with the sale.

Time for a real estate attorney to be consulted.