Recently one of the local newspapers ran an article on the risks associated with short sales. Many agents are not familiar with the drawbacks of short sales and thus, do not explain them they adequately prepare their sellers.
Though Arizona is an anti-deficiency state – meaning that if a seller loses his/her home through foreclosure, the lender cannot collect the remaining dollars that the seller contracted to pay. Some of the lenders also honor that system with the short sales; HOWEVER, not all of them do.
“I know that there is a great deal of confusion and uncertainty about this issue,” said Michelle Lind, general counsel for the Arizona Association of Realtors. She noted that real-estate lawyers differ on which situations are subject to the anti-deficiency statutes but that, depending on the kind of loan and the terms of the short-sale contract, the seller can be liable.
“The law is unclear,” she said, “and many variables factor in.”
It appears as though the second mortgages or home equity seem to be the biggest culprits. Often, the seller is required to agree to pay specific amounts for the lender to approve the short sale in the form of promissory notes.
If you, as a seller, wish to short sell your home, be sure to consult with an attorney and a CPA.