Foreclosed on and buying a new home cash?

Real Estate Agent with Advantage Realty #1

Last year, we had a cash transaction on one of our listings with a buyer that had gone through foreclosure previously. A settlement from an insurance claim enabled them to buy a new home for cash. Much better option that renting, right?

What they didn't consider was that the deficiency judgment from their foreclosure would attach to their new home as a lien. They are, once again, under water and unable to sell their current home as the judgment is much larger than what their current home would sell for. Venturing a guess, the deficiency is so large, the lender would be stupid not to pursue it.

Yes, we did advise them to consult with an attorney in regards of how to take title of the new home (put it in your Mother's name or in a family trust etc.) but they decided against that.


If you have gone through foreclosure or have done a short sale and you happen upon a large sum of money that enables you to pay cash for a home, please consult with a real estate attorney before you go ahead with your purchase to make sure your previous foreclosure doesn't haunt your new home.

Comments (5)

Silvia Dukes PA, Broker Associate, CRS, CIPS, SRES
Tropic Shores Realty - Ich spreche Deutsch! - Spring Hill, FL
Florida Waterfront and Country Club Living
Andrea, that is quite a story and worth a suggest. It seems these buyers wanted to "save" the money or the trouble to seek legal advice and that got them in a situation that is now much harder to control.
May 07, 2012 11:50 AM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Andrea, that is exactly what everyone needs to do that has gone through a foreclosure.  With something like this... you can never be TOO careful.  I feel  sorry sorry them.

May 07, 2012 12:03 PM
Kathy Judy
Tri-Cities Real Estate retired - Ontario, OR

that was eye opening! 

May 07, 2012 12:04 PM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

By the way... I am hoping that, since it sounds like you handled their cash transaction, that... once you suggested they consult an attorney about their purchase, and they decided against it, I am hoping that you had them sign a form acknowledging that you DID recommend that, and they declined. 

The form would be something similar to the form used when an agent suggests having an inspection done, and the client refused.  It is an excellent CYA that we all need to do.

May 07, 2012 12:06 PM
TheMillsTeam YourSebringRealtors
Advantage Realty #1 - Sebring, FL

The title agent (employed by our broker's attorney wife) at closing advised them of the situation after we  had done so as well. The buyers clearly opted to keep things in their name.

I guess they're fine as long as they don't feel the need to relocate again. Their judgment is almost three times as large as the value of their current home. They are pretty much STUCK!

May 08, 2012 06:46 AM