3 Ways to Avoid Legal Trouble With REOs

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Mortgage and Lending with First Time Buyer, Jumbo, VA, FHA, Construction, Renovation, and Reverse Certified NMLS 325344 | LO-0916110

Hello Everyone,
Just thought I would pass on this article. The moral of the story is that we need to watch our backsides when it comes to this market. Now is more important than ever to team up with your LO and swap notes when it comes to all of these legal issues.

Daily Real Estate News  |  January 7, 2011  |    Share

3 Ways to Avoid Legal Trouble With REOs 
REO and short-sale transactions are expected to continue to make up a big part of the real estate landscape in 2011. Real estate coach and trainer Bernice Ross offers some of the following tips to avoiding common pitfalls when working with distressed properties. 

1. Make sure you have the training. If you lack the experience in handling REOs, short sales, or foreclosures, you need to disclose that fact to your clients. You’re better off not taking on a transaction if you lack the proper training in navigating these complex deals. Instead, a smarter and safer business approach: Refer the business to another agent and take a referral fee, Ross says.

2. Determine if it’s a recourse or nonrecourse loan. You need to determine how many loans the owner of a distressed property has on the property and whether those loans are “recourse” or “nonrecourse” loans, Ross says. With a recourse loan, if a lender forecloses or grants a short sale, the lender can still seize other assets belonging to the defaulting home owner to cover the lender’s loss. With a nonrecourse loan, the lender's only option is to foreclose on the property and they will not be able to seek such a deficiency judgment. It’s possible for an owner to have both recourse and nonrecourse loans on the same property.

Also, make sure your clients are fully informed about any tax ramifications prior to committing to any type of transaction, Ross notes, suggesting you have clients consult a tax professional before making any final decisions. 

3. Have an attorney on call. Many lenders use language in their listings and sales contracts that note a “blanket indemnification of the lender." That means if there’s a lawsuit you’ll have to defend yourself and the lender. Have an attorney review all lender listing agreements so that you can remove any blanket indemnification language, Ross says. 

Source: “5 Pitfalls of Distress Real Estate Listings,” Inman News (Jan. 6, 2011)

Here is the link: http://www.realtor.org/rmodaily.nsf/pages/News2011010701

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Rainer
483,118
Chandler Real Estate Liz Harris, MBA
Liz Harris Realty - Chandler, AZ
#ChandlerRealEstateAgent

I ask all of my clients to consult an attorney and a CPA!

Jan 07, 2011 01:12 PM #1
Rainer
120,219
Steve Ewing - Keller Williams Realty
Keller Williams - Stockton, CA

Brian - We are real estate agents and not lawyers or CPAs. I always advise clients to see their lawyer or CPA when legal or tax questions come up.  So much better safe than giving advice I am not qualified to give.  Thanks for the blog.

Jan 07, 2011 01:21 PM #2
Rainer
201,518
Debbe Perry
Real Living Carolina Property - Morganton, NC
828.439.3084 Morganton/Lake James NC

You're so right - we need to be careful!! Thanks foe sharing this article.

Jan 07, 2011 01:22 PM #3
Rainer
40,184
Brian J. Bailey
First Time Buyer, Jumbo, VA, FHA, Construction, Renovation, and Reverse Certified - Paradise Valley, AZ
Senior Loan Officer

Exactly Liz and Steve! We always send them off to a professional. As a Loan Officer, my job is to stay informed on what it takes to fund loans and what way best that I can serve my industry partners. It is not to know tax ramifications nor is it to fully understand anti-deficiency laws. That is why it is so crucial to have a team of professionals that you can trust to help guide your clients and ourselves through unchartered territory. Good luck out there!!!

Jan 07, 2011 02:15 PM #4
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Rainer
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Brian J. Bailey

Senior Loan Officer
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