What might happen after Foreclosure??

If you think after losing your house in a foreclosure or short sale you are out of financial hurdles then you are wrong. Many of you must be wondering what exactly is Short Sale. A “short Sale" is a transaction where the sale price is insufficient to pay the total of all liens and costs of sale and where the seller doesn’t bring sufficient liquid assets to the closing to cure all deficiencies.

According to CNN, mortgage lenders can still chase homeowners even after foreclosure if there's a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these "deficiency judgments" are ticking time bombs that can explode years after borrowers lose their homes. It can happen to homeowners who got their home appraised for less that its actual value. There are people who got checks two years later after their foreclosure from their lien holders. In some cases people had to declare themselves as bankrupt simply because they did not have the money to pay to the lien holders.

Will they chase you?

Banks might pursue deficiency judgments depending on many factors, including in which state the borrower lives in and whether there is a second mortgage or other liens on the property. But if borrowers ignore the possibility of deficiencies, it could haunt them."Once they have a judgment, they can pursue you anywhere," said Richard Zaretsky, a board-certified real estate attorney in West Palm Beach, Fl. "They can ask for financial records, have your wages garnished and, if you fail to respond, a judge can put you in jail." Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale. The scariest part is that judgments don’t have to be obtained immediately. Lenders or collection agency can wait until the debtors have recovered financially before they swoop in. Once the court grants a judgment, the lender has 20 years there to collect, with interest.

What you can do?

The best option for you as a homeowner is to keep your property. As the mortgage rates are record low at this time of the year refinancing your property can be a good option too. Another option is to downsize yourself that means to rent your property and use that money to pay your mortgage. You can then find an affordable rental home for yourself too. If your financial situation worsens, you can file for bankruptcy.

For the buyers buying a foreclosed property ask the lender to release you from any further obligation. Because in many scenarios to many borrowers may not be aware that they have to ask for release. Buyers have to take in consideration that short sales typically take longer than transactions not requiring lien holder’s approvals. On Short sales buyers also have to note that typically lien holders will not allow any seller concessions for repairs etc.