Short Sale update - Seconds are pursuing sellers and Realtors are being sued for giving legal advice

Seeing seconds going after sellers is certainly a disturbing trend.  Aren't there already enough problems with short sales.  Eegads.. not wild about getting tagged for giving legal advice either.  Short sales are getting even less fun by the day.

This stuff is so scary anymore.  You read one report one day and the home owners are going after the banks on foreclosures next day the short sales.  I always get the letters from any liens and paperwork from the bank and tell them that they should have atty and accountant look at them because I am no legal expert.

Short sales are a complicated landscape.  Thanks for the update John.  As usual you are on the cutting edge of this issue.  Tni

You're exactly right.  In CA it's irrelevant that a second was 'purchase money'... if your approval letter says 'release of lien' and says nothing about releasing the liability, your client now has MORE liability than had they let the purchase money first foreclose and wipe out the second  (CA CCP Section 580(d) does not apply to short sales). 

We have been telling agents for 3.5 years now, READ THE APPROVAL.  Don't ever tell your client, 'you have a purchase money loan, you're fine'.  Let their attorney tell them whether they are fine or not. 

CA CCP Section 580(d) only applies if the home forecloses... so use that as leverage to get the second to include the verbiage, "agree to release the seller of all liability".  As I explained here, CA lawmakers tried to include purchase money seconds in SB 931, which covers first liens, but the Governator vetoed it and so the final bill only helps with first liens.

Trent

TheShortSaleGenius.com

That approval letter is what needs to be thoroughly read and the client review it and their attorney.  IF the words are not there for release of pursuing a deficiency, then one better be up front with their clients.  It is the clients choice however they need to understand what it says!

I think this is another reason we, as agents working with short sales, need to be very sure we understand the entire process and fully disclose the potential liabilities to our clients.  Some of us get into trouble, not by intentionally leaving out the potential liability, but because we don't always understand them