Many people do not realize a short sale has 2 parts important.
1. Release of lien
2. Release of loan balance.
Almost all short sales include a release of lien. Why? Because (among other reasons) the new lender is going to demand first lien position.
Therefore, most buyers have to purchase properties free and clear of liens.
However, most Realtors do not take the next step for their sellers.. Most Realtors do not have the experience or skills to negotiate a release of the remaining loan balance from tough lenders like Bank of America.
Bank of America has two basic short sale approval templates for Realtor negotiated short sales.
Each template has language such as this:
"Bank of America and/or its investors may pursue a deficiency judgment for the difference in the payment received and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above. In addition, if this loan is covered by mortgage insurance, the mortgage insurance company may reserve the right to pursue the seller for the deficiency based on the terms of the mortgage insurance policy Furthermore, there may be tax consequences associated with entering into a short sale. The seller is encouraged to seek the guidance from an independent tax advisor, and/or an attorney, before proceeding with the short sale.
If this short sale is contingent upon Bank of America and/or its investors receiving a promissory note, we will reserve the right to collect the full amount on the new promissory note which may lead to us pursuing a deficiency on that balance should the need arise. If the short sale does not close, then we will pursue all remedies under our note and mortgage. "
If someone tells you to accept this language, have them do so in writing and get their brokers signature on the letter.
If a lawyer tells you not to worry about this language... have him short you the case law and explain his reasoning in writing.
Some Bank of America Short Sale Strategies
1. Do nothing, or go through with the short sale as is ... (Not usually the smart chocies)
2. If Bank of America is the owner or servicer of your second loan, you may to consider a short payoff on the second while staying current or reinstating the senior loan.
3. Hire someone who can show you they have gotten bank of america to change the offensive wording.
4. Hire someone to get the BofA short sale department to write a side letter saying they won't seek the deficiency
5. Spend some time or money on a loan audit or lender liablity campaign. Bank of America may not be able to prove they made the proper releases on loans orginated by Countrywide. If you can support your demand for a recission they may begin negotiating with you. (in the past a variation of this strategy earned us our very own negotiator for our files.) But, we have had to start again when BofA took over countrywide.
Know your options before you commence a short sale with the Bank of america short sale department.
