Everyone’s situation is a little different, and speaking in generalities about the process of extricating oneself from a home purchase gone negative, is foolish.

If a homeowner has a purchase money first mortgage only, in a state with non-recourse laws, then shame on the Managers of the banks that actually issued loans that would allow people to “walk away” scott free under non-recourse loans. Greed has it’s penalties and stupidity will have repercussions whether you are fortune 500 bank, or an individual.

Otherwise, a short sale may be the best option for a homeowner to live up to their fiduciary responsibility to repay as much of the obligation as possible to first and/or second lien holders. Full payment was the deal signed up for. If you cannot make full payment a homeowner should make as many reparations as possible, not inflict more economic damage by living as a mooch freebie and forcing foreclosure, or worse, damaging stripping the home (collateral). It’s not good for a homeowner, the community, or the country.

Of course lenders may want to recover additional moneys, as is their right, after execution of a short sale transaction. If a homeowner is able to negotiate with a lender(s) to accept lower than amounts owed, either in the short sale process, or in the recovery process, then good for them. In my opinion, this is not “stiffing” the lender, it’s renegotiating a deal gone bad into a mutually acceptable solution.

While all parties involved usually must share the pain, it’s a far better scenario than a foreclosure.

For the record, my situation is:

-Wife broke foot, out of work for 2 years, ate up 1/2 of retirement savings
-My income dropped due to recession
-Work wanted me to be “more geographically attractive” and move to another state

I cannot hope to pay back all that I owe, but I will do my damned best to minimize the losses for all parties, including my lenders.

I OWE it to them.

If you have a recourse loan, unless the lender/s specifically sign up to a non-recourse short sale the sale will only relieve you of the portion of your debt that is covered by the sale price and you will still owe the rest.

A short sale is just that folks. Once the bank agrees in writing to do a “short” they cannot legally come back to you and say they were just kidding unless there are extenuating circumstances and, even then it’s unlikely.

-spartacus

Hearing it from you sets me at ease. Thank you for taking the time to respond to my question.

I have purchased a home this year (March) and it was a short sale. I am incredibly excited about it and am looking to raise our two young boys there for a very long time. As I was reading the comments of others, I became concerned for myself regarding the short sale. In asking the question to my realtor and the loan professional if I could ever be held liable for the “short” balance of the home they assured me it could not happen since the original loan that was to be shorted was not in my name. Since I am the owner of the home now (the same address of the loan that was shorted) could the bank come looking for that money from me?

Thank you for your time.

Scooped again by CR, tough to stay ahead of him!