If you are experiencing troubles making your mortgage payments in Virginia. This blog is here to give you useful answers to some of the most common questions associated with short sale and foreclosure in Virginia.
Will I still owe the bank after a short sale?
It depends. If you owe more on your home than the amount you get from selling it, the balance left over needs to be addressed. This is known as a deficiency balance, and banks can handle it in one of three ways:
- decide to forgive the debt; called a waiver of deficiency
- request you pay back the balance via unsecured note
- seek a court judgment or collection on the remaining debt
In several states, like California, legislation forces banks to waive the deficiency if they allow a short sale. Virginia, however, does not have any such law; to be granted a waiver of deficiency, you will have to negotiate for it. For more information on short sale, visit our page short sale negotiation.
Do most banks tend to waive the balance following a short sale?
For the most part, first position lien holders will grant waivers of deficiency on a short sale. Second liens, however, are entitled to greatly diminished portions of the profit in a short sale. Because of this, they will tend to want to make up for the loss. This can come in the form of requesting you contribute money at closing, forwarding your account to debt collections, or pursuing a court case to get a judgment against you.
Do I need to use a real estate agent to perform a short sale?
Maybe, maybe not. In Virginia, there is no law forcing you to employ a licensed agent to sell in a short sale. Your bank, however, may ask that you have the home listed with a real estate broker to assure you are doing everything in your power to obtain fair market value. While they cannot force you to list your home with a real estate agent, it is within their right to refuse to comply with a short sale if you do not.
Am I required to show the bank my financial information?
Possibly. Most times, the bank will want proof it is no longer within your financial means to make payments on your loan until it is paid off as set in the loan agreement when you borrowed the money. This means they will need verification that there is a reason you are selling your home. If you state you can no longer handle the financial burden of making payment, they will need proof. Generally, this is done through the furnishing of tax returns, bank statements, paystubs, and a short sale hardship letter.
There are, however, a handful of short sale programs that need only a limited amount of documentation, removing the need to provide financial information.
Is Virginia a judicial or non-Judicial foreclosure state?
The predominant type of foreclosure in Virginia is non-judicial. Non-judicial foreclosures do not involve courts, but require what is known as a “sale under the power of sale.” When a mortgage is first signed, it typically contains language called a “power of sale clause.” This lets an attorney foreclose on a property once defaulted on, in an attempt to pay off the defaulted loan (sometimes called a “note”). To employ this type of foreclosure, legal documents must contain the power of sale provision because this is a non-judicial process with extremely strict notice requirements.
Does the seller owe a deficiency amount after foreclosure or short sale?
In a foreclosure, a deficiency judgment may be sought after the property is sold for less than the amount secured by the mortgage. Essentially, this boils down to the borrower owing the lender the difference between the amount of the original loan and the price for which the home sold at auction.
In the case of a short sale, it is possible the deficiency may be waived, if recognized in writing in the short sale approval letter from the lender.
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Financial issues are a very common problem. If you are having issues with your mortgage contact a Virginia foreclosure defense lawyer online to learn what your options are. Virginia has specific short sale and foreclosure laws that must be followed. Don’t take a risk, call us today to learn how we can help you!