What is a Deficiency and Why Should I Be Worried?
A deficiency balance is the difference between what you owe and what your house is worth or would sell for today if you were to short sale or foreclose. The sale would not net enough money to pay off the debt. You would still be responsible for paying the full balance of the loan. The unpaid amount is called the deficiency and the lender can pursue the borrower for the unpaid balance.
It is always advised to negotiate the deficiency balance in a short sale, rather than let the house foreclose, because the lender can go after you and attempt to collect the whole deficiency amount plus fees and legal costs. In a short sale, the negotiated amount is usually $10,000 or less, and in some cases the negotiator may not ask you for anything. If you do not obtain a waiver of deficiency, in some circumstances, the lender may have 6 months to 6 years to come after you depending on when the loan was originated and if it is a first or second, among other factors, so it is best to negotiate the deficiency as soon as possible and have peace of mind rather than be looking over your shoulder for years.
To learn more about Deficiency Judgments, click here!
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