What is a promissory note in a short sale?

Short sales continue to be a fact in today's real estate market. For those who are just learning about the facts of short sales a short sale is win a property is sold for less than is owed on it. In other words the property is short of the amount needed for a full payoff to the bank. This money that is short has to be taken as a loss by someone and in most cases that is the bank. If you search on "Short Sales" on this blog or check out the related posts you will find more information.

On to the question at hand for today which is what is a promissory note in relation to a short sale.

A promissory note is simple a promise to pay. In some cases the bank decides that they don't want to write off the amount owed on the property and they determine that they want the owner of the property to take another unsecured loan and pay them back. They cannot do this in the case of a purchase money loan or a loan where you bought the house with the money but they can do this if the loan that is going to go short was a refinanced loan or equity line of credit. It also depends on what your loan documents said when you signed them.

So what can you do to avoid this? The bank can proceed with legal action against you and while most banks have decided not to do this there are a few who have decided to proceed against home owners. If a bank is deciding that they want you to take a promissory note you should seek legal counsel to see if there is anything that can be done for you. Do your best to negotiate with the bank yourself and see what kind of terms they can give you. There are no set rules for terms of these promissory notes so you may be able to negotiate terms that are favorable to you. The only thing you shouldn't do is ignore it. Even in foreclosure a bank can proceed with the same action so make sure you look at all of your options.


Related Posts

• Where have all the short sales gone
• How many are too many loans in a short sale?