Avoiding a Short Sale Deficiency Judgment

Think back to when the US economy had bottomed out. Millions of Americans were left without work and rendered unable to make their mortgage payments. In an effort to escape the pressure of their mortgages, many chose to short sell their homes. It seemed like the perfect idea, until many homeowners learned later that there was a deficiency judgment against them.

While the American economy and the housing market are on the mend, homeowners still risk a deficiency judgment following a short sale. If you are considering short selling your home, make sure you know how to properly protect yourself from such a judgment. Explore the following tips and contact a Las Vegas real estate attorney to help you navigate the legal jargon and how to best proceed.

What is a Deficiency Judgment?

Before you can understand a deficiency judgment, you need a rudimentary understanding of short sales. In a short sale, you are essentially selling the home for less than what is still owed on the property. This is typically done in an effort to avoid foreclosures.

Because the sale is completed for less than what is owed, a deficient balance is created. Even though a lender has to approve the short sale price, they may still come after you for a deficiency judgment to try to collect the remaining balance of what is owed.

If this happens to you, you want to make sure to have the real estate lawyer Las Vegas relies upon to protect you from garnished wages or levies on your bank account. In Nevada, there are laws that may prevent a lender from seeking a deficiency judgment. However, there are very specific qualifications that must be met for such law to apply. This is something that should also be discussed with your lawyer.

How to Avoid a Deficiency Judgment

Now that you understand what a deficiency judgment is and how it can affect you, you may have ways to protect yourself against it. Here are four ways you may be able to avoid this inconvenient result:

  1. Negotiate. You can ask the lender to waive the right to seek a deficiency while you are negotiating for your short sale price. If there is an agreement, it must be documented in the short sale documents to be legally binding. Have the best real estate lawyer Las Vegas offers help you iron out the details.
  2. Settle. There is a chance the lender won’t waive the deficiency. If this happens, you can ask for and possibly settle upon a lower deficiency amount.
  3. Chance. There is a chance the lender won’t even file a lawsuit to pursue the deficiency claim. Even if you are getting calls from collection agencies, you don’t have to worry about garnished wages or attachments of your account until you receive an actual judgment. The only way that will happen is if the lender goes through the expensive and lengthy process of filing a lawsuit. Some lenders may decide to avoid the process all together.
  4. Bankruptcy. If none of the other three options work and you do end up with a deficiency judgment filed against you, you can always file bankruptcy to remove the debt. You can file a Chapter 7 bankruptcy to eliminate all the debt or a Chapter 13 that may require you to pay a small part of the debt over time. If the deficiency is your only debt, this may not be a wise idea. Discuss your options with the real estate lawyer Las Vegas trusts to make the right decisions.

Don’t face a disgruntled lender alone. Schedule a consultation with the experienced attorneys at Simon Law. For more information about this Las Vegas real estate attorney, contact 702.451.7077 or info@marcsimonlaw.com.