The Morning Report
Get the news and information you need to take on the day.
Our reporting relies on your support. Contribute today!
Help us reach our goal of $250,000. The countdown is on!
Reader Mark e-mailed a question in:
We are short selling 3 properties, all upside-down with first and second liens. On each property, the first and second are with the same bank. We are hoping the second lienholders will accept very minimal payoffs. None of the seconds were used to purchase the properties they are attached to, but the proceeds from 2 of them were used to purchase 2 of the 3 properties (took a HELOC on property one, bought property two, took a HELOC on property two, bought property three, took a HELOC on property three for cash).
I know that in the event of a Trustees Sale the second could seek a defiance judgment. My question is whether the second could or would or seek a defiance judgment after they have accepted the minimal payoff in a short sale? Does it depend on the language used in the short sale agreement?
Also, could the HELOCs used for purchasing properties two and three be considered non-recourse?
You are correct. Look at the language used in the short sale agreement. In addition to releasing their lien, ensure that the short sale agreement expressly releases you of personal liability for the note. You may want to have legal counsel review the short sale documents prepared by the lenders.
(For more on the difference between types of loans and which ones the banks might pursue after foreclosure, read today’s first post.)
If you have more questions for Gary Laturno, please leave a comment below or send an e-mail to email@example.com.