Thinking about a short sale? Find out if your loan is a recourse or non-recourse loan!When you short sale your home, there are some key terms that you need to be aware of including whether or not you have recourse loan. It is important to understand the process of a short sale and the difference between a recourse loan and non recourse loan before you decide if this program is right for you. The short sale allows you to pay off most of what you owe and potentially salvage your credit. This short sale solution is a benefit to those who have no equity in their home, have an adjustable loan where the monthly payments are increasing or simply can't afford their mortgage payments.In order to qualify for a short sale, a home owner must owe more than the home is actually worth. In order to determine this, a broker's price opinion or appraisal is needed. Most banks will have a broker complete the BPO if you approach them for a short sale or you can request to have it done yourself. While banks don't particularly enjoy doing a short sale, it is better for them financially than a foreclosure and most banks will be willing to work with you.At this time, the recourse or non recourse loan issue will arise. The vast majority of short sales are done under a non recourse loan policy. This means that the home owner and the bank agree to a figure that is less than the actual debt but suitable for both parties giving the banks no recourse once the home is sold. It is entered on a credit report as a debt that is settled for less than is owed.Non Recourse LoansCalifornia for example is a non-recourse state. This essentially means that as long as the homeowner has purchased their property with a purchase money loan or used a home equity line of credit for home upgrades or in the purchase itself, the banks do not have recourse after the short sale is complete. In other states the banks do have the ability to come after the homeowner for the balance owed.December 14 2011 - Temecula1YesReport a ProblemProblemSelect oneOffensive contentIrrelevant contentSpam (pure self-promotion)OtherDetailsYour emailPlease enter a valid email address.Submit CancelContent flaggedWe will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.We're sorry. This service is temporarily unavailable. Please come back later and try again.