More Problems with Distressed Properties
Got back yesterday from California Realtors meetings in Indian Wells — lots of sessions about problems in working with banks on short sales and bank-owned homes (REOs). Sellers who are underwater with their mortgage, and choose a short sale, need to make sure that is the best choice for them.
Banks are commonly having these sellers sign paperwork that allows the lender to pursue the borrower for deficiency judgments long after the sale closes. This is the case even when it is a “purchase money” loan, which, by law, prohibits banks from going after the borrower for money lost.
Sellers should get legal advice from an attorney and financial advice from a CPA before choosing how to dispose of their home when equity is less than the loan amount. Likewise, buyers need legal advice before accepting bank counteroffer language on an REO purchase. As I have written in previous posts, beware of banks.