Understanding A "Deficiency"
State law regulates the actions that a lender can take on a secured loan, such as a mortgage. A State is either designated as a "recourse State" or a "non-recourse State." Unfortunately, New Jersey is a recourse, or "deficiency judgment" State. Simply put, New Jersey allows lenders to pursue the full deficiency after a short sale has been completed.
An example of this is as follows:
You owe your lender $300,000.00 on the balance of your mortgage. Your house sells in a short sale transaction for $240,000.00 leaving a deficiency of $60,000.00 still owed on your mortgage. New Jersey law allows your lender to file for a deficiency judgment through our Courts. It is therefore imperative that the person negotiating your short sale require your lender to waive their right to claim a deficiency after the sale. This is something we do on every short sale we negotiate. NJ Short Sale Central, LLC will scrutinize all approval letters to make sure that the lender's waiver of any deficiency is clearly stated.