I was emailed by a Realtor with a great question, I did my best to answer this questions below.
Is it standard practice for banks to ask sellers to sign a note or make arrangements to repay deficiencies? I think we’re finally getting close to approval on one, and my sellers will not agree to that. Any advice? Thanks!
It is getting more and more so that way. What banks are likely doing is stockpiling some of these notes and judgments and they will sit on them until the recovery occurs. Then they will hire an attorney to go after the homeowners. The Loss Mit’s will tell you, “Oh, you know we don’t have any plans to go after them immediately”, but that’s a joke…of course they won’t pursue it know, they will wait until they have money you cant squeeze blood out of a turnip.
What you have to start doing is writing in your fax cover letter to the bank that, “This offer is contingent upon the bank acceptance without any deficiency or promissory note.” So, you put them on notice up front.
If you are currently in the throws of negotiations with a Loss Mitigator and they are pushing for a note (Like we had with Countrywide yesterday), then you can do what I did which is have the homeowner update their hardship letter to explain that they unequivocally DO NOT have any wherewithal to pay the note. They are insolvent as evidence by the financial statement and they have no means to do so.
You also may want to check the laws in your state regarding deficiency judgments. Many states, like mine, have laws that state that if the lenders have elected a certain type of foreclosure that they are not allowed to pursue deficiency judgments. If this is the case in your state, then this can be used as leverage in your negotiations. For, why would the homeowner sell their property via short sale and get a deficiency judgment when they can let it go and walk away scott free?
Hope that helps you.
Matthew
