July 28, 2008

Florida Recourse or Non-recourse?

Filed under: Florida,Judgment

I have invested in 2 luxury condos in Florida which we were hoping to flip but construction was delayed and the market collapsed.

We had to take circa $500K loan on each. Our income did not qualify us but the bank gave us a “non-income verification” loans for extra $10K at closing. They gave us mortgages because we had some assets.

After 1.5 years of carrying mortgages we depleted all our assets and quit paying.

Both condos are worth less then $250K now.

We are in foreclosure and are horrified that the bank will go after us for the defficiency balances. We are told that depends on whether or not our mortgages are “recourse” type.

Is that right and how can we determine whether or not our loans are “recourse” I combed my mortgage agreements and cannot find any mention of “recourse” or “non-recourse”



Hi Irene,

First, the bad news is that Florida is a judicial foreclosure state and unless the promissory note specifically indicates that it is non-recourse, a deficiency judgment is a possibility.

Now, for some better news, the bank knows that the property value has been cut in half on those condos.

Find a buyer at the lower price and submit a short sale package to the lender.  Since you are being proactive and have depleted your assets, you can condition the short sale on either a full release of liability or what is known as a “soft note”.  A soft note is a signature loan for a portion of the deficiency and may be a compromise for those who are at risk of becoming the losing party to a deficiency judgment.

Read: Rachel’s Short Sale, Short Sale & Mortgage Insurance, Short Sale Deficiency Negotiations, and Should I Sign A Short Sale Signature Note?

Thanks for the questions and hope this helps.


This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

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