It is a question s asked thousands of times a day by owners across the country who are upside down on their mortgages. If I sell my home will I have to repay any of the money I owe? The answer is going to be entirely up to your lender. Honestly even though Congress passed legislation that should, in many cases, eliminate a tax liability for the loss it doesn’t mean that every short sale will qualify.
Recently an article in the Wall Street Journal pointed out owners with home equity lines of credit and second mortgages may find themselves being asked to sign promissory notes for a percentage of the “short” in order to sell their homes. Recently one of my clients was asked to sign a promissory note for almost $25,000. The deal will probably fall through as a lender asking an owner who is already broke to take on more debit is well illogical (at least in my opinion.)
Will this move by lenders to expect upside down owners to be on the hook for part of the money lead more owners to just throw up their hands and walk away? My opinion is YES. Most homeowners who are facing a short sale (not all) have just enough financial resources to be able to move into a rental property and asking them to be burdened with additional debt will be the straw that broke the camels back.
Lenders who enforce this policy will probably find themselves with a payoff of ZIP when the house goes to foreclosure.