Will a Short Sale Lender Sue for Defficiency?

Short Sales can be a solution for Home Owners with distressed homes and difficult financial circumstances. However, Home Owners should know the whole story before pursuing this route.

We are a law firm that handles Short Sales, so we get a lot of calls from people who want to know the answer to this question:

Question: How can I be sure my lender will not sue me for the deficiency of a short sale after they have accepted a lesser amount?

My Answer: 
Usually when a short sale lender approves a short sale they will send the seller/borrower a Short Sale Approval Letter specifically stating that the short sale lender agrees to not sue the seller/borrower for the deficiency.  (The deficiency is the difference between what is owed on the property and the amount that the short sale lender will net from the short sale).  

You as the seller/borrower should attempt to obtain a Short Sale Approval Letter from your short sale lender(s) that specifically waivers the bank's right to pursue the deficiency as part of the negotiation with your lender(s) in connection with your agreement to sell the property.  

You can use your agreement to sell the property, and the fact that you have found a buyer to purchase the property, as leverage in connection with obtaining a waiver of the deficiency.  This is because the short sale saves the bank time and money.  

The short sale means that the bank will obtain funds for the property and will not have to go through the process of foreclosing on the property and then marketing and selling the property.  

You may need legal assistance to effectively negotiate with the bank to obtain a specific waiver of the deficiency in the Short Sale Approval Letter.  Sometimes, if the deficiency is very large, the bank may only agree to a partial waiver of the deficiency and demand a Promissory Note for the portion of the deficiency they will not agree to waive.  

Again, you may need legal assistance in connection with your efforts to work the best deal with the bank and to stop the bank from foreclosing on your home before you can get the short sale completed. 

Disclaimer: The above is intended as general information and your specific situation may be different so it is always important to speak with a lawyer about your specific situation.

For further information, visit our website at:

MarkWeinsteinLaw.com

Renter Obligations when Mortgage is NOT Being Paid

A common question I get from folks who have called my office recently is whether a renter must continue to pay rent if the landlord is not paying his/her mortgage.

Actual Question: "Am I obligated to pay rent if the homeowner isn't paying the mortgage? The mortgage has not been paid since December. The management company is aware and still requires the [rent] to be paid."

My Answer:

Yes, you are still obliged to pay rent. If you do not, then you can be evicted. If you have a bona fide written lease then even if the property is foreclosed upon your lease will still be valid against the bank or the new owner until the end of the existing lease term unless the property is purchased by an owner occupant. In that case the new owner occupant can terminate your lease so long as the new owner occupant gives you 90 days notice.

Disclaimer: The above is intended as general information and your specific situation may be different so it is always important to speak with a lawyer about your specific situation.

For further information, visit our website at:

MarkWeinsteinLaw.com