The bank forecloses on your home and then files a lawsuit against you, how is this possible?

By
Real Estate Agent with Berkshire Hathaway HomeServices 01238708

The bank forecloses on your home and then files a lawsuit against you. How is this possible?  I was reading in RISMEDIA on June 8, 2010, about a home seller who has sold his home in a short sale. He sold it for approximately $200,000.00 less than the first and second mortgage he owed on the property. The Mortgage lender has agreed not to pursue further action to recoup their losses.

Evidently there are many home sellers who did not negotiate this clause into the transaction. Hence there are many lenders who file lawsuits and are going after foreclosures and short sales owners. Why you might say? The answer is, that lenders are trying to discourage bad behavior, such as angry homeowners who destroy kitchens, bathrooms and sell fixtures such as granite counter tops on e-bay to name a few.

Customarily mortgage companies will not sue homeowners who negotiate in good faith or those who default due to job loss or other catastrophic circumstances. Nevertheless I strongly encourage potential sellers who are underwater to get it in writing from the Mortgage Lender that they will not pursue further legal action once the transaction closes.

 If you are a consumer  who is considering buying  or selling  a home, investment real estate, vacation homes, or beach properties in Southern California, Los Angeles, Century City, Westwood, West Hollywood, Beverly Hills, Culver City, Marina Del Rey, Venice or Malibu. Feel Free to give me a call at 310.486.1002 (USA) or email me at homes@endrebarath.com  or visit one of my websites at http://www.endrebarath.com  Your Pet Friendly Realtor. I contribute a portion of My commission to Local Animal Rescue Organizations.  

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Ambassador
759,137
Charita Cadenhead
Keller Williams Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

Endre this seems like part of a vicious cycle.  Will it ever end?

Jun 12, 2010 09:53 PM #1
Rainmaker
514,331
Tom Priester
Paradise Sharks - Jupiter, FL
Paradise Sharks

Endre of course this is possible. Many people who truly do note have a financial hardship have tried, and completed short sales. If the lender did not waive the right to seek a deficiency judgement they will go after their money.

Jun 12, 2010 10:17 PM #2
Rainer
147,902
Don Spera
CR Property Group, LLC - East York, PA
Serving York and Adams County, PA

Endre, I cannot blame the lending institutions at all.  Where does common sense come into play when someone trashes a house.  I've seen people take the plumbing out, the electrical panel, and as far down as the little plastic plates over the light switches and receptacles.  Then they deliberately punch holes in the wall and soil and tear the carpet.  Those are the ones that I would go after, as that is being a complete idiot.

Jun 12, 2010 11:21 PM #3
Rainer
126,068
Barbara Kornegay
REMAX Essential - Wilmington, NC
Wilmington NC Real Estate, Homes

"If your determination is fixed, I do not counsel you to despair. Few things are impossible to diligence and skill. Great works are performed not by strength, but perseverance."
Samuel Johnson

Jun 12, 2010 11:31 PM #4
Rainmaker
114,299
Laurie C. Bailey-Gates
Robert Paul Properties - Barnstable, MA
ABR, SFR

I think it is important for those doing short sales not only to understand what their liability is but also how will this impact their credit scores going forward.

Jun 12, 2010 11:49 PM #5
Rainmaker
4,797,361
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Endre, you're going to see a lot more of this.  Especially in the non-recourse states.  And in particular with the strategic defaults.

Jun 12, 2010 11:54 PM #6
Rainmaker
5,383,270
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Thanks for the reminder to troubled mortgage borrowers. If you default on your obligations, you should expect to hear from collection agencies if you have not negotiated a settlement.

 Blooming for Maryland home buyers.

Jun 13, 2010 12:11 AM #7
Ambassador
1,975,797
Fernando Herboso - Broker for Maxus Realty Group
Maxus Realty Group - Broker 301-246-0001 - Gaithersburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

It is very important that homeowners that may have a foreclosure in their future protect themselves as much as possible.

Jun 13, 2010 12:38 AM #8
Rainer
432,184
Margaret C. Taylor
Century 21 New Millennium MD - Mechanicsville, MD
St Marys/Calvert/Charles MD Real Estate Agent

If we address Short Sales with our clients we should at least educate them what might happen, concerning their debt, and refer them to professionals with legal knowledge.  If real estate agents do not do this they may be at risk later.  You may have to wait for the listing, while they investigate, but you will be in a much safer position. Margaret C.

Jun 13, 2010 01:33 AM #9
Rainmaker
82,224
Derenda Grubb
CENTURY 21 Mike D. Bono & Co.'s - Lake Charles, LA
GRI, ABR, CRS

This sounds like individuals trying to go it alone and prevent themselves from having to pay a REALTORS fee.  I cannot imagine a REALTOR not knowing to write that into the contract and make sure they were covered in that respect.

Jun 13, 2010 09:20 AM #10
Rainmaker
3,204,954
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Charita--yes it seems like a vicious cycle

Tom-- I agree with you that there were people that tried to game the short sales and they deserve what is comming to them. Then there were the poor uninformed who did not have the support behind them to get them thru this and have them somewhat protected.

Don--those individuals should not only be chased after via Lawsuits I would encourage criminal proceedings as well. I am of the understanding if it is over $500 that is a felony.

Jun 13, 2010 06:17 PM #11
Rainmaker
3,204,954
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Barbara--- I love the quote, I have a huge motivation poster with the words "Perseverance" in bold letters.

 

Laurie --- you are absolutely right

 

Gabe great point, I wonder which are the "non-recourse" States?

Jun 13, 2010 06:21 PM #12
Rainmaker
3,204,954
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Roy-- it is more than just a reminder, it is a warning to read the fine print

Fernando--I feel bad for the ones that had bad representation and got into this situation and now they might have even more problems....

Margaret  great point, real estate practitioners could be pulled in if they do not educate their clients and document that they did.

Jun 13, 2010 06:26 PM #13
Rainmaker
3,204,954
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Deranda  interesting take on it, thank you for sharing.

Jun 13, 2010 06:27 PM #14
Rainmaker
871,994
Elyse Berman, PA
Best Connections Realty, Inc. - Boca Raton, FL
Boca Raton FL (561) 716-7824 CRS, ABR, GRI,ePR

Endre,  I've read they have 5 years to file and up to 20 years to collect on the deficiency. 

Jun 15, 2010 10:46 PM #15
Rainmaker
3,204,954
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Elyse, wow that is a long time, so the ones on the hook will be on it for a while. Thank you for the information

Jun 16, 2010 10:33 AM #16
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Rainmaker
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Endre Barath, Jr.

Realtor - Los Angeles Home Sales 310.486.1002
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