Legal Question in Real Estate Law in California
Post Short Sale- 2nd lender wants remainder of loan
We purchased a house CA as our
primary residence. In early 2007 we
refinanced - a 1st and 2nd to
710k. Lowered our monthly
payment, raised
loan value about 15k, and we
used the remodeled a
bathroom.
In late 2007, our jobs were hit by
the mortgage crisis, we entered
into a short sale with the lenders
through our realtor
Our realtor was in contact with both
banks, and told
us the short sale would relieve us of
our debt.
the house sold as a short sale in July,
2008.
Now the second lender is telling us
we owe the full value of the second
($100,000) as ''unsecured debt.'' I
contacted our realtor, who told us
''they said they weren't going to do
that'' and then emailed us a form
from the bank which they evidently
had before the short sale finalized,
stating that we would be on the hook
for the remainder of the balance.
We never saw the form, it was not
included in the sale documents. We
did not sign this form, however, our
realtor apparently saw it and
neglected to inform us.
It appears our options are to A)
negotiate with the second bank to
come to a settlement amount, B) get
a RE attorney to get the realtor into
court and hash it out, or C)
bankruptcy
2 Answers from Attorneys
Re: Post Short Sale- 2nd lender wants remainder of loan
First of all, why would you rely upon a realtor for a legal opinion??? The lender has every right to pursue you for the unpaid portion of their note, but if you can convince them that you do not have it and likely will not have the money in the forseeable future, you may be able to negotiate them down a bit. Sure, you can sue the realtor, but again, the court may find you were foolish in taking the word of a realtor with regard to matters of law...it is kind of like relying upon the medical opinion of a receptionist in a doctor's office rather than the doctor; moreover, it is expensivve to sue, you may not win and if you do, you may not get back the attoreny's fees you've incurred.
Re: Post Short Sale- 2nd lender wants remainder of loan
I would suggest that you speak with an attorney for a brief consultation. The question your post raises in my mind is how did the sale to the new buyers close escrow unless the second lender reconveyed their deed of trust, and they generally will only do that with your assent to repay the obligation. They generally have you sign a new note or a some sort of agreement to repay the obligation. I think its worth your time to review this with an attorney - we are in San Clemente (just down the freeway from you) so if you'd like, give me a call and we can take a look. I do agree with Ms. Deming that you may have some basis for negotiating a settlement of the obligation given your circumstances, but the lender is under no obligation to accept anything short of the full amount owed. In that case, bankruptcy may be your only option.
*Due to the limitations of the LawGuru Forums, The Gibbs Law Firm, APC's (the "Firm") participation in responding to questions posted herein does not constitute legal advice, nor legal representation of the person or entity posting a question. No Attorney/Client relationship is or shall be construed to be created hereby. The information provided is general and requires that the poster obtain specific legal advice from an attorney. The poster shall not rely upon the information provided herein as legal advice nor as the basis for making any decisions of legal consequence.
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