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Short sale denied by lender, then foreclosed upon. What happens next?

January 16th, 2010 · 2 Comments · macomb county mi real estate market, short sale advice in Macomb County MI

A recent question on Trulia Q & A section has still been on my mind days after I replied to it.

The former home owner who asked the question was denied a short sale in which the lender wouldn’t take $30,000 less for their home. It was then foreclosed upon and sold for $116,000 less that what was owed.

As someone who is seeing this type of thing happen in our Macomb County area time after time again I am outraged. I am also curious as to whether these people would stand a chance in court with an affirmative defense of “plaintiff failed to mitigate damages” ?

My prediction: It’s going to be a wild 5 years or so of increased litigation, precedence set in some scenarios, and more debt buying companies jumping on the “let’s buy the debt and sue for deficiency balances” bandwagon.

Are any of you reading about or seeing firsthand this type of activity by the banks / mortgage holders starting to try and collect the deficiency balances after denying a short sale?
~Kris Wales~  A partner for your real estate needs in Macomb County MI

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2 responses so far ↓

  • 1 moria1975 // Mar 5, 2010 at 12:49 pm

    YES!!! This is currently happening to me!!! Back in April 2009 my short sale was denied. Today, March 5 2010, an appraiser came out and told me that that was the biggest mistake they could have made. There is NO WAY the house will appraise for what they could have taken in the short sale. Now..I am going to have to plead my case in court and hope that they dont make me liable for their incompetance!!!!

  • 2 Angela // Dec 17, 2010 at 4:24 pm

    And here I thought I was crazy! This is happening to us in Kent County, MI. Wells Fargo has denied TWO short-sale offers on our home. We listed it in April of 2010… got our first offer and moved out. Our son is young and we didn’t want to uproot him in the middle of the school year. So we got a fresh start. Now, they have denied a second offer. We owe 185,000, the house is worth 135,000 at best. The offers were 125,000 and 122,000, respectively.
    Now, we will have to file bankruptcy. We are out of options. This whole process has been long and disturbing.

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