Short Sale, Foreclosure and Strategic Default

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Wednesday, May 23, 2007

Short sales- negligence

In a pre-foreclosure negotiation with a bank on behalf of a homeowner in florida. I requested a short sale package from the loss mitigation department. Upon receipt, I asked myself why on earth would my seller disclose all this information about her assets. What if the bank does not agree to a deed in Lieu of foreclosure or a short sale.

Being licensed as an attorney and Realtor in California and Florida, I seriously considered how quickly a lawyer would sue me if I disclosed my clients (if she had any) assets without making her aware of how serious the consequences of such a disclosure could be.

I would be giving the bank a map to her assets (if she had any). If my client had assets the lender would be much less likely to negotiate a deal with her. The bank might just elect to go to foreclosure and collect on their deficiency. I then had to consider her position vis a vis a foreclosure action and potential deficiency proceeding. I had to consider if a bankruptcy would protect her remaining assets. I would have to evaluate which assets would be safe from attack by a creditor. (which varies from state to state).

Sure, I know Realtors practice law without a license almost every day (and some do it well) but this is a complex situation relying on expertise in multiple areas of the law. I found it necessary to consult with other lawyers and do legal research. I still have pending questions.

Yet - every single piece of advice I have seen advises people to hand over the requested financial information to the banks.

Negligently wrong... in whole or in part.

It is just not so. Negotiations with the bank are dynamic. In a falling resale market the bank knows that it must be reasonable or else it may lose some of its remedies. An experienced attorney should be able shape a remedy that satisfies the needs of both sides. Worst case scenario... the attorney crafts an agreement which limits the banks use of the financial information.

How long will it be before we see the first adwords which read? Lose your home...Did you get short sale advice from a non-lawyer. Call us...

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