The loan payments were killing Tammy (not her real name) on her trendy, upscale home. So she found a more affordable home and planned to move into it before her current place became a tightening noose around her neck.
To get a quick sale, Tammy and her Realtor carefully reviewed the recent sales in her neighborhood to set her asking price. She priced her home attractively and was fortunate enough to find a serious buyer in less than 90 days.
Like many sellers, Tammy was upside-down: She owed more on her mortgage than what her home was currently worth. So, Tammy submitted a short sale request package to her lender. After months of waiting for an answer, the lender agreed to accept less than what she owed … with one big catch.
Tammy’s lender demanded that she sign a Promissory Note agreeing to pay the lender $12,000 (in monthly installments) after the sale was completed. That is, the bank would go along with the short sale if Tammy promised to pay back some of the money that the bank had discounted in order for the sale go through. Tammy would have been on the hook to pay the very debt that she desperately needed to get out from under.
Tammy’s buyer really wanted the house and hoped she would agree to the bank’s demand. Tammy’s Realtor also wanted to see the closing happen and strongly suggested that Tammy agree to sign the Promissory Note. More than anyone, Tammy was most eager to get the house sold. But she was not willing to commit to making payments on a debt she knew she could not honor.
So Tammy simply told the bank “No.”
Oh sure, she was really thinking: “If you think I’m going to sign that thing, you can pound sand.” But, she thought better of actually saying that. Instead, she respectfully insisted that she could not agree to those terms.In the end, the bank agreed to the short sale without the obligation to pay the lender after the sale. Tammy stood her ground – even when she was advised to cave in – and prevailed.
Why did the bank ultimately agree to the closing without the $12,000 Promissory Note? It wasn’t out of kindness or compassion for Tammy’s situation. It was because the bank eventually determined that it was in their best interest to do so. Fortunately for Tammy, the bank’s best interest worked out for her as well.
The lessons are simple: Don't be bullied by banks or peer-pressured into a bad deal. Arm yourself with the facts and then aggressively defend your right to financial peace-of-mind!
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