Massachusetts allows lenders to pursue deficiency judgments after a short sale or foreclosure unless the deficiency is waived in writing. Know your options before you act.
No equity means your home's value roughly equals what you owe — you can sell it and break even after paying off the mortgage and closing costs, but you won't walk away with cash. Underwater (or "upside down") means your home is worth less than your mortgage balance — you owe more than the sale will produce.
If you have no equity but your home is not underwater, a standard sale still works — the mortgage gets paid at closing. If you're genuinely underwater, you need a short sale or another workout with your lender.
Massachusetts is a recourse state — lenders can sue homeowners for any remaining balance after a short sale or foreclosure sale. This is called a deficiency judgment. Unlike some states that restrict or eliminate deficiency judgments after foreclosure, Massachusetts law (MGL Chapter 244) permits them after both foreclosure sales and short sales.
The critical protection in a short sale: get deficiency waiver language in writing from the lender as part of the short sale approval letter. If the approval letter does not explicitly waive the deficiency, the lender can still pursue you for the balance — even after the home is sold. Always have a Massachusetts real estate attorney review the short sale approval letter before closing.
| Option | How It Works | Credit Impact | MA Deficiency Risk | Timeline |
|---|---|---|---|---|
| Short sale | Lender approves sale below payoff; lender receives all proceeds | Significant — 7-year reporting; less than foreclosure | Lender can pursue balance UNLESS waived in writing at approval | 3–6 months |
| Deed in lieu | You deed property to lender voluntarily; lender cancels debt | Similar to foreclosure; slightly better | Often waived as condition — must get in writing | 2–4 months |
| Foreclosure | Lender takes property through non-judicial process (MGL Ch. 244) | Worst — 7 years on credit report | Lender can sue for balance after foreclosure sale | 3–5 months minimum |
| Loan modification | Lender restructures loan — lower payment, extended term, or principal reduction | Minimal if current; reported differently if delinquent | N/A — debt restructured, not forgiven | 60–180 days to negotiate |
| Sell with equity (if any) | Proceeds pay off mortgage at closing | No impact | N/A | 7 days (cash sale) to 90 days (traditional) |
If you have any equity, a cash sale is the fastest, cleanest exit — no deficiency risk, no credit damage.
Call (401) 396-7427Get Cash Offer →Yes — through a short sale. The lender must approve the sale price and terms. Critical: always get deficiency waiver language in writing, because Massachusetts lenders can pursue the remaining balance after a short sale unless it's waived.
Walking away leads to foreclosure and a potential deficiency judgment — Massachusetts lenders can sue for the balance after the foreclosure sale. A negotiated short sale or deed in lieu typically produces a better outcome.