Beware the potential for a deficiency judgment!

http://finance.yahoo.com/news/Mortgage-lenders-pursue-cnnm-3107909798.html?x=0

Michigan allows mortgage lenders to pursue deficiency judgments against borrowers who do not fully payoff their mortgage loan. This can happen even if the bank approves a short sale or a deed in lieu of foreclosure. When I work with homeowners we work together to make sure that the banks either waive their right to seek a deficiency judgment or that the borrower fully understands what options the banks have to pursue them after closing.

Banks can also pursue mortgagors for a deficiency following a foreclosure in which they take the home. It is now regular practice for banks to bid less than the debt at a sheriff sale thereby establishing a deficiency and providing themselves the option to sue their former customer for the difference between what was owed and what the "auction" netted for the bank.