In A Short Sale May Not Mean You’re Home Free the Wall Street Journal highlights that lenders are increasingly seeking deficiency judgments against distressed borrowers who walk away from their homes in short sales.

Deficiency judgments are court remedies awarded to lenders to help their recuperate losses from short sales.  If a homeowner owes more than his property is worth and is able to negotiate a short sale with his lender he may find himself stuck owing part of the negative equity balance .

The good news for California homeowners is that all purchase-money loans for 1-4 unit residential properties are except from deficiency judgment.  This means that for most homeowners their first mortgages are safe from lenders pursuing further claims.

The catch for many homeowners is that hard money second mortgages are not except, and lenders are increasingly pursuing court judgments to recoup losses.  Borrowers usually need to file bankruptcy to expunge these debts, or pursue another type of debt settlement.

The takeaway is that things are rarely as easy as they seem, despite emphatic salespeople who might lead you to believe otherwise.  Nonetheless, you do have options and all economic hardships can be overcome.  Do your research, consult an attorney or a real estate professional.

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