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One month into 2010 and short sales continue to dominate the real estate market. What's happened since this time last year?  A lot.  Lender and investor policies have evolved considerably since first being overwhelmed by the volume of mortgage defaults and were generally understaffed and undertrained to handle the situation.  Largely, lenders have slowly churned through files as they evolved their approval processes and strategies.  

A year ago, lenders were more apt to offer complete waiver of deficiency, although even then some, like HSBC for instance, had firm prohibitive policies.  Now, complete waiver is the exception.  In Q1 2010, lenders are generally not waiving deficiency.  More likely is an approval letter with either arguably ambiguous language, such as "this satisfies your lien in full," or "this letter may or may not be construed as a forgiveness of debt."  Alternatively, lenders are specifically reserving the right to seek deficiency down the road.  How long down the road?  Five years.  A long time before the seller is out of the woods, but in all likelihood the lender will likely seek it sooner in the form of a settled debt.  That means, in all likelihood and in today's climate, although the deficiency will likely not be waived in full, the seller will be able to negotiate it down to a manageable figure, still resulting in a significant savings.  

Of course, each file is different and the leveraged balanced in negotiation will vary.  However, a short sale largely offers benefits over foreclosure.  Although complete waiver of deficiency is unlikely, reduced deficiency is probable at this point.  Resolution of the matter prior to the foreclosure judicial sale date results in the foreclosure being dismissed in its entirety.  Short sale generally offers credit benefits over foreclosure, translating to the homeowner's ability to purchase or rental of another home.  Further, because resolution of a defaulted mortgage is often enough to enable the homeowner to emerge out of financial hardship, a short sale contributes to the homeowner's avoidance of bankruptcy.  This year's Florida real estate market will undoubtedly be another dominated by short sales.