Some Florida attorneys and other experts sometimes seem to suggest there is no difference between having a Florida foreclosure or Florida short sale on your record or credit report and pose the question:

“Why go through the hassle of a short sale?”

The thought process might be technically correct, but only in a state described as a “non-recourse state.” Florida is not one of those states and is in fact a RECOURSE state. This means the banks can and will likely come after you for the difference between the principal value of your Florida mortgage and the value of your home at the time of the Florida foreclosure sale.

In non-recourse states, like California, people can walk or stay, and either way the banks cannot come after you. In Florida, New York and other recourse states the banks can come after you for as long as 20 years. The banks have the right to try and garnish your wages and bank accounts and even depose you under oath. In fact they can and will likely come after you even if you are long dead. You can read my Op-Ed piece in the Sun-Sentinel for a more detailed description of the difference between recourse and non-recourse states.

However, if you get out by orchestrating a South Florida short sale, you’ll likely be released from the amount the bank does not recover at closing. In fact the reason it is called a “Short Sale” is because the bank is coming up short at closing.  Now the Bank has a few options. They can take the hit as they do frequently, and as they may well be required to do according to new rules coming out of the Obama Administration, or they can negotiate some payment plan with you. Sometimes the terms are good, and other times they are truly oppressive. However, remember whatever you negotiate is not written in stone or blood and is unsecured.

Thus, the Bank will likely sell the Note (here we go again) to a hedge fund, or collection agency for pennies on the dollar. So you once again will have an opportunity to renegotiate the terms. And even if you don’t make any payments at all, are the banks really going to spend thousands of dollars to find you, serve you and hire attorneys to sue? Maybe… but my bet is they will first go after the low hanging fruit: the poor folks who never read the Oppenheim Law blogs and now have deficiency judgments entered against them.

So, to recap, The Oppenheim Law bottom line:

Explore a short sale first before throwing in the Florida foreclosure towel.