Short Sales May Lead To Unintended Consequences For Home Seller

A recent column in the Contra Costa Times offers this warning to underwater homeowners who are considering unloading their homes through a short sale:

• There can be real benefits to sellers in conducting a short sale. Sellers still need to be cautious when they're considering a short sale. There can sometimes be unintended consequences from a short sale.

• For example, Sellers can get ready to close a short sale only to find out that their lender won't release them from personal liability on their loan. If the seller completes such a short sale, then the lender may pursue the borrower for any deficiency between the loan amount and the sales price. This actually happens, and some lenders pursue borrowers in such situations who have participated in a short sale.

• This can be true even though the same borrower would have had no personal liability had a nonjudicial foreclosure been conducted.(1) The lender's not in the business of advising the borrower as to the most advantageous or best course of action for the borrower.

For the column, see Short sales, foreclosures require care.

(1) California and Arizona are two states that prohibit chasing foreclosed-upon homeowners for the foreclosure sale deficiency in certain situations.