Homeowners that are underwater and considering a short sale typically face what I call the “Big 3.”

#1 is getting deficiency waiver (getting the bank to agree not to come after you for the difference between what you owe and what they get in a short sale.)

#2 is the tax implications of a short sale and…

#3 is the impact on their credit.

For most sellers getting relieved from having to pay back the difference between what is owed on the mortgage and the net proceeds obtained in a short sale is the biggest concern. This is the highly sought after “deficiency waiver” that all real estate agents seek to get for their clients when doing short sales. This is the language that we look for when the short sale approval letter is issued. It typically looks something like this…”ABC Bank will waive its right to seek a deficiency balance under the mortgage note” or “The owner of your note, the mortgage insurer, if your loan is covered by mortgage insurance and ABC Bank, waive their right to pursue collection of any deficiency following the completion of your short sale and your debt is considered settled.”

FHA and VA Short Sales

If you have an FHA or a VA loan and you are approved into the FHA Pre-Foreclosure Sale Program or VA Compromise Sale Program the deficiency is paid to the lender by FHA or VA in the form of insurance and the loan is made whole so there is no deficiency for the lender to come after you for.

Fannie Mae and Freddie Mac

Effective November 1, 2012 under the new Standardized Short Sale rolled out by both Fannie Mae and Freddie Mac if approved your short sale the lender must waive the deficiency. “The servicer must inform the borrower that any deficiency will be waived in the letter to the borrower approving the short sale or deed-in-lieu of foreclosure, and provide a deficiency waiver at the closing.” So if the investor who owns your mortgage is Fannie Mae or Freddie Mac this would apply to you.

So if you have an FHA, VA, Fannie Mae or Freddie Mac loan and your short sale is approved you are guaranteed deficiency waiver. Not sure if your loan is any of these types? Contact me today and I can help you determine what type of loan you have. Amy Shocket (775) 815-7627 or email amyshocket@sbcglobal.net