As a Realtor, I would probably answer yes to that question. As someone who deeply cares about my clients and their well being, my answer would be that it depends. We know what foreclosures do to people’s credit and the market in general, but what is the difference between a foreclosure and a short sale on someone’s credit? They both make it so that people will have to wait to get into a position to qualify for another mortgage to buy a house, they both hammer your FICO score.
Is your State a Non Recourse State? That is an important question to consider when advising a client whether they should do a short sale or not. Our State, Utah, is a recourse State. That means that the mortgage holder can come back on the Seller for the deficient amount. Can your sellers afford that? I am not a credit expert, but I really think a short sale and a deficiency judgement on someone’s credit can really hinder their ability to qualify for a loan.
What is worse, here in Utah, the mortgage holder has SEVEN YEARS to file that deficiency judgement. Meaning that they have 7 years from the closing of that short sale to file a judgement. Is this something that I am going to brag about my State? Absolutely not, but I am going to make sure that my selling client understands that closing the short sale may not be the end of their problems. Plus unless we can get the mortgage holder sign a waiver of their recourse rights, they are gambling that the mortgage holder will just let them walk away.
To compound the matters here in Utah, the mortgage holder can file a deficiency judgement within 90 days after the foreclosure sale as they have the right to go after the seller for any deficient amount. This part of our law to me is absolutely bogus! A foreclosure should end the entire matter in my opinion!
What I am getting at, is that as a Realtor, you are supposed to be the expert when you advise your clients on the sale of their house. Who do you think the seller will name first to their attorney should they decide to sue because they had no idea that they were liable for deficient amounts owed on a short sale? I would gamble that if the Realtor isn’t the first name that comes out, it will be in the top 3.
As a Realtor you should know your State’s laws. Even with this knowledge, you need to stress to the client to seek legal advice! I know that they probably can’t really afford an attorney, but can they afford not have one when situations like this are very viable possibilites? In Utah, to my knowledge, the safest bet not to be stuck with deficiency notices are either a Deed In Lieu of Foreclosure or bankruptcy. I am not an attorney, so I would advise that the client seek advice from an attorney on these options as well. I still believe even in Utah, if you can get the mortgage holder to waive their right to collect any defiency, that a short sale is the best alternative there is for people in danger of losing their house!!!
I just believe that it is my responsibility as a Realtor to guide them through the entire process, so that they completely understand what is going on, allowing them to make an informed decision! Part of that responsibility is knowing that I am not an attorney, and there are times when legal counsel is advised.
If you’re looking to buy or sell real estate in Cedar City, Utah; please give us a call. We would love to earn your business!