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Deficiency judgments let creditors haunt borrowers for up to 20 years
St. Pete Times ^ | March 28, 2011 | Kris Hundley, Times Staff Writer

Posted on 03/28/2011 7:16:39 AM PDT by dawn53

Think of it as Act 2 of Florida's foreclosure crisis.

In the first act, borrowers lose their homes.

In the next, lenders come after them for the debt still owed.

Unlike a foreclosure, which homeowners dread but expect once they stop making payments, deficiency actions can sneak up on people who thought their problems were behind them when they handed over the house keys.

"People have no idea of all the trouble that's coming," said Margery Golant, a lawyer in Broward County who is handling a growing number of deficiency defense cases.

(Excerpt) Read more at tampabay.com ...


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I had never heard of this until recently. I was talking to a couple who had sold their home through a bank approved short sale, but were hit with a deficiency judgment.
1 posted on 03/28/2011 7:16:43 AM PDT by dawn53
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To: dawn53

Banks and debt are not your friend.


2 posted on 03/28/2011 7:22:37 AM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: driftdiver
“Banks and debt are not your friend.”

Why should I pay someone elses mortgage?
I don't want to.
I want my money to stay with me and my family.

3 posted on 03/28/2011 7:26:48 AM PDT by HereInTheHeartland (Yes We Can, have smaller government)
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To: dawn53
Usually part of the short sale process is for the homeowner to sign an unsecured note for at least part of the money the bank is going to lose out on. In reality the property owners DID borrow the money. It wasn't a gift.

OTO the banks did some really stupid things in the first place by going way out on a limb in estimating property values too high even though they knew it was a bubble that was going to burst sometime. The biggest losers are the banks' stockholders.

4 posted on 03/28/2011 7:28:28 AM PDT by from occupied ga (Your most dangerous enemy is your own government,)
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To: dawn53
It was capped in Florida at one time at ten years, the cap expired, Rubio when leader refused to redo the cap, now it is twenty and can be renewed for another twenty. In short it is forever., the only state that has a drop dead date on debt collection is north Carolina. Given the federal governments involvement in causing the housing bubble crap one would think, they would put a cap on default judgment's, but don't look for such common sense coming from republicans. But you could call you representative and raise hell.
5 posted on 03/28/2011 7:28:56 AM PDT by org.whodat
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To: HereInTheHeartland
Why should I pay someone elses mortgage?

BINGO!


6 posted on 03/28/2011 7:29:52 AM PDT by Iron Munro ("Our country's founders cherished liberty, not democracy." -- Ron Paul)
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To: dawn53
The possibility of deficiency judgments on mortgages varies considerably from state to state: many states, especially in the West, have anti-deficiency statutes dating from the Depression, which forbid lenders from pursuing a deficiency judgment. In some states, deficiency judgments are possible in some circumstances, but not in others, e.g. deficiences might be forbidden on a 'purchase money' mortgage or trust deed, but not if you have refinanced. And, of course, if a senior lender forecloses and junior lenders are wiped out, most often, they can pursue deficiency judgments. You really have to know local real estate and lending law.

The moral of the story is NEVER do a short sale without getting a RELEASE from your lender(s) - unless you're prepared to file bankruptcy to discharge any deficiencies.

7 posted on 03/28/2011 7:30:18 AM PDT by CatoRenasci (Ceterum Censeo Persae Esse Delendam -- Forsan et haec olim meminisse iuvabit)
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To: HereInTheHeartland
"I want my money to stay with me and my family."

YOU HAVE MONEY?!? Well, then you're rich, and not paying your fair share!
8 posted on 03/28/2011 7:30:46 AM PDT by Darteaus94025
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To: HereInTheHeartland

“Why should I pay someone elses mortgage?”

Did I ask you to? Most banks are privately owned and/or operated. Even the publically owned ones are largely controlled by a small number of people.

The losses they take should be theirs, just as the profits they make.

Banks love regulation and courts when its on the profit side.


9 posted on 03/28/2011 7:31:08 AM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: dawn53

I heard about this on a radio show on Saturday, but just a few minutes worth. There is a way you can ask the bank to waive or forgive the deficiency as part of the short sale but if not done properly, it sets up a big slug of taxable “income.” What a mess.


10 posted on 03/28/2011 7:32:24 AM PDT by NonValueAdded (Palin 2012: don't retreat, just restock [chg'd to comply w/ The Civility in Discourse Act of 2011])
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To: dawn53
I very seldom see a 1st trust holder go after a borrower after a foreclosure because the bank usually bids the property in for their own claim, thus eliminating and possibility of a deficiency. It's usually the 2nd trust that sues the former homeowner after a short sale or a foreclosure. Realtors don't seem to mention that to their clients.

In fact, I can't see much benefit to a seller in a short sale. It doesn't help their credit, and usually doesn't allow them to escape liability if there is a second trust.

11 posted on 03/28/2011 7:32:32 AM PDT by PUGACHEV
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To: dawn53

This is why a lawyer is a good idea in this situation.

You can fight the foreclosure to leverage a stipulation from the bank that there be no deficiency judgment.


12 posted on 03/28/2011 7:32:39 AM PDT by Notwithstanding
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To: dawn53

This is so sad, I feel so terrible for everybody. Things are really scary.


13 posted on 03/28/2011 7:34:16 AM PDT by yldstrk (My heroes have always been cowboys)
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To: driftdiver
Banks love regulation and courts when its on the profit side.

Privatize profits, and socialize losses. Where do I sign up for that deal?

14 posted on 03/28/2011 7:36:23 AM PDT by dfwgator
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To: dfwgator
Privatize profits, and socialize losses. Where do I sign up for that deal?

Well you're already signed up for the second half of that deal. You have to be in Congress to get in on the first.

15 posted on 03/28/2011 7:37:53 AM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: HereInTheHeartland
Why should I pay someone elses mortgage?

I agree completely but just who do you think is bailing the banks out?

16 posted on 03/28/2011 7:39:05 AM PDT by Altura Ct.
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To: dfwgator
"Privatize profits, and socialize losses. Where do I sign up for that deal?"

White House.
17 posted on 03/28/2011 7:39:14 AM PDT by Darteaus94025
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To: dawn53

I thought the bailout paid this.
If not, then what was the bailout for?


18 posted on 03/28/2011 7:39:20 AM PDT by BuffaloJack (Obama did not learn incompetence; he was born to it.)
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To: dawn53
I had a property in Florida back in 2008, we had an ARM, it blew up, our renters moved out, we went from +600 a month positive cash flow to -$2100 after they left and our ARM went from %6.0 to %9.5. Well the best free advice I got was from a realtor friend of mine, GET AN ATTORNEY. I got one I got on referral, paid a $1500 retainer for 15 hours and agreed to 150 per hour after that. Well it took all of 6 hours of his time, we played hardball, and threatened bankruptcy to big bad Bank of America, that they would be stuck with an REO, a 150 per month lawn maintenance bill or face a 100 per dollar fine for a nasty lawn AND and get this maybe a lawsuit for a shaddy mortage. We let them know, there would be no money froma deficency judgment and they would lose 10's of thousands on the house, despite what rosey math their attorney was feeding them. Well they folded like a cheap tent in 2 weeks and the short sale took 2 months and we had NO deficency clause. They even offered to refi at 5.00 fixed for 30 years..ummm too late. Punchline is if you must short sale, get an attorney and don't deal with some 9 dollar an hour Ebonics speaking Shamiqua in CS at you your bank. Let them know you will do everyting short of breaking the law to make the transaction as difficult as possible and make it a loser for them. Best 600 bucks I ever spent, why get agita, pay someone to get it for you.

When in a pissing contest it's best to be the skunk....

19 posted on 03/28/2011 7:41:54 AM PDT by pburgh01
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To: PUGACHEV

I think these folks that told me about it had the defiency judgment on their original mortgage, but it was with a smaller bank.

In Florida prices have dropped about 50 percent from the peak in 2006. These folks did it right, put large down, affordable payments...until unemployment took it’s toll.

Sad part is the bank absolutely would not work with them on lowering interest rate (they weren’t asking for principle reduction.) And in Florida where our insurance seems to go up every year, and assessments downward haven’t kept up with the market so taxes are still pretty high, it’s pretty hard for folks that lose their income. So they sold on a short sale, the bank okayed a low ball offer, and then hit them with the deficiency judgment.

I sort of agree with this type of judgment but wonder why the bank isn’t willing to deal with the present homeowner who’s current on their mortgage but struggling.


20 posted on 03/28/2011 7:43:54 AM PDT by dawn53
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To: CatoRenasci

A good Realtor will look out for the client. Because Realtors work with the lenders when handling Short Sales, that Realtor should try to obtain a Release for the client to sign so this situation doesn’t occur.

Some people mistakenly believe that walking away or short saling is the answer and it is not. However, Short sale is the best but, again the seller and the seller’s Realtor should ensure that they have the documents that show the deficiency has been ‘forgiven’.


21 posted on 03/28/2011 7:43:54 AM PDT by Outlaw Woman
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To: Outlaw Woman

BTTT


22 posted on 03/28/2011 7:48:48 AM PDT by Cold Heart
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To: dawn53
The link below provides an answer in some of the cases.

http://www.youtube.com/watch?v=ssl5yb7FewA

23 posted on 03/28/2011 7:55:21 AM PDT by PUGACHEV
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To: Outlaw Woman

Good Realtor = oxymoron


24 posted on 03/28/2011 7:56:58 AM PDT by CatoRenasci (Ceterum Censeo Persae Esse Delendam -- Forsan et haec olim meminisse iuvabit)
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To: NonValueAdded
I heard about this on a radio show on Saturday, but just a few minutes worth. There is a way you can ask the bank to waive or forgive the deficiency as part of the short sale but if not done properly, it sets up a big slug of taxable “income.” What a mess.

TANSTAAFL

There ain't no such thing as a free lunch....

25 posted on 03/28/2011 7:59:24 AM PDT by CatoRenasci (Ceterum Censeo Persae Esse Delendam -- Forsan et haec olim meminisse iuvabit)
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To: driftdiver
“Did I ask you to?”

Yes you did.

1) I own stock in banks
2) I and my kids will pay higher fees and rates if we have to pay someone elses mortgage.

It's not the banks fault that someone made a mistake and overpaid for a home.
I know there are thousands of really good people facing terrible struggles right now. But that doesn't mean I should pay.
We are putting into place a huge wealth transfer with all of these programs.
Markets will work if allowed to.

26 posted on 03/28/2011 8:01:52 AM PDT by HereInTheHeartland (Yes We Can, have smaller government)
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To: pburgh01

Your advice is the best. Hire a good attorney if you are going to go the short sale route. I hear some on the radio I would trust. They have a call in show and have seen it all...Meaning they know what the banks will do and they are thinking ahead of the banks

If you want to ensure you won’t be dogged by a deficiency judgment...then shell out for an attorney who has had experience in this field. Not just any attorney


27 posted on 03/28/2011 8:01:58 AM PDT by dennisw ( The early bird catches the worm)
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To: dawn53
The only way to deal with lenders who play hardball is to play hardball as well: bankruptcy may be unpleasant, but it does make deficiency judgments go away. Lenders like the smaller bank rely on borrowers' unwillingness to file bankruptcy.

Anyone whose loan is underwater, and is contemplating trying to get out of the situation should get a referral for a good local lawyer experienced in representing debtors. A few hundred dollars for a consultation may be the best money you've ever spent. But, make sure you get a good lawyer, referred by someone you trust.

28 posted on 03/28/2011 8:05:26 AM PDT by CatoRenasci (Ceterum Censeo Persae Esse Delendam -- Forsan et haec olim meminisse iuvabit)
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To: PUGACHEV
I very seldom see a 1st trust holder go after a borrower after a foreclosure because the bank usually bids the property in for their own claim,

That used to be the case. Not Today. Most banks bid much lower than the balance and many do not bid at all.

29 posted on 03/28/2011 8:08:49 AM PDT by CharacterCounts (November 4, 2008 - the day America drank the Kool-Aid)
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To: CatoRenasci

Well I would take offense to that as I am a Realtor. But after the things I’ve witnessed in this field, I’m truly sorry that I went into the field. I’m a very good Realtor because I put the client first and do everything in my power to make sure that the client is satisified and I’m not the only one but overall, it is the greediest, most political (as in ‘office type politics’) of any industry I’ve been in.


30 posted on 03/28/2011 8:08:54 AM PDT by Outlaw Woman
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To: HereInTheHeartland
Why should I pay someone elses mortgage?
"You're thinking of this place all wrong. As if I had the money back in a safe. The money's not here. Your money's in Joe's house...right next to yours. And in the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending them the money to build, and then, they're going to pay it back to you as best they can."
The point being that this is a bank, not the government. If you don't want the banks to lend your money to others (at the risk of the bank making stupid decisions), then you shouldn't put your money in the bank.
31 posted on 03/28/2011 8:10:06 AM PDT by PENANCE
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To: CatoRenasci

Plenty of folks in that process already ate their free lunch. Just ask Raines and Gorelick.


32 posted on 03/28/2011 8:10:24 AM PDT by NonValueAdded (Palin 2012: don't retreat, just restock [chg'd to comply w/ The Civility in Discourse Act of 2011])
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To: dawn53

“I sort of agree with this type of judgment but wonder why the bank isn’t willing to deal with the present homeowner who’s current on their mortgage but struggling.”

Because they don’t want to set an example of forgiving the loan.

Also because they profit greatly when the house is foreclosed on. Not through the property but all the backdoor stuff.


33 posted on 03/28/2011 8:11:43 AM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: PENANCE
I have no problem with the bank. I expect Joe, the Kennedy's and Mrs Macklin to pay back their loans.

I have a problem with the politicians who want to wipe away their debts.

34 posted on 03/28/2011 8:12:37 AM PDT by HereInTheHeartland (Yes We Can, have smaller government)
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To: HereInTheHeartland

“1) I own stock in banks”

Then you are a business owner and I have zero sympathy for you. You want the profits but whine about the business risk after taking INSANE risks.

“2) I and my kids will pay higher fees and rates if we have to pay someone elses mortgage.”

No you don’t. You pay the market rate, same as everyone else.

The markets will work but the banks don’t want an open market. They want control.


35 posted on 03/28/2011 8:14:00 AM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: dawn53

yet in bankruptcy the deficientcy is wipped out.

There are banks that waive the deficiency as part of the shot shale process.

also the judgment requires a judgment. if the case is dismissed there is no second bite at the apple.


36 posted on 03/28/2011 8:16:44 AM PDT by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: CharacterCounts
I'm in Northern Virginia, and in my job I happen to meet with foreclosure attorneys in our state every other week or so. There are really only three big firms doing foreclosure work in the eastern half of this state, and they very rarely do a specified bid auction, which is where there might be a possibility of a deficiency. Almost always, the bank buys the property for its claim, and the bank is the only bidder. There has lately been an increase in speculators at the auctions, which is a good thing, but nothing like it was before the bust. Of course, Virginia is a non-judicial foreclosure state, and things may be different in a judicial foreclosure state, like Florida.
37 posted on 03/28/2011 8:19:59 AM PDT by PUGACHEV
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To: pburgh01

Congratulations on your successful theft.


38 posted on 03/28/2011 8:21:59 AM PDT by Darth Reardon (No offense to drunken sailors)
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To: driftdiver
“You want the profits but whine about the business risk after taking INSANE risks.”

The only people whining are those who are strapped and can't pay their mortgage. I would probably whine also. But I didn't move to a high growth area like Florida or California in the mid 2000’s and buy a house. Sucks for those who did.

“No you don’t. You pay the market rate, same as everyone else.”

Market rate is now higher for everyone. Check out what PMI has done in the past couplke of years for example.

39 posted on 03/28/2011 8:28:38 AM PDT by HereInTheHeartland (Yes We Can, have smaller government)
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To: driftdiver
“You want the profits but whine about the business risk after taking INSANE risks.”

The only people whining are those who are strapped and can't pay their mortgage. I would probably whine also. But I didn't move to a high growth area like Florida or California in the mid 2000’s and buy a house. Sucks for those who did.

“No you don’t. You pay the market rate, same as everyone else.”

Market rate is now higher for everyone. Check out what PMI has done in the past couple of years for example.

40 posted on 03/28/2011 8:28:44 AM PDT by HereInTheHeartland (Yes We Can, have smaller government)
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To: dawn53

“bank approved short sale, but were hit with a deficiency judgment”

Most States allow this. The bank can still claim you owe them the short sale difference. If you had a $100 mortgage but sold for $75, you owe the bank $25.

Also the bank can issue an IRS form 1099 if they write off that $25, claiming you basically were given $25 and must pay income tax on it.


41 posted on 03/28/2011 8:32:57 AM PDT by CodeToad (Islam needs to be banned in the US and treated as a criminal enterprise.)
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To: Outlaw Woman
There are (many) very good people who go into real estate, and I have no doubt you're one. But, for every real estate agent who puts a client ahead of a fee, there are, what?, a dozen?, a hundred?, who look only to their fees.

Another part of the problem, is that many (in my experience) real estate agents -- especially in states where attorneys are not regularly involved in real estate transactions -- do more harm than good because they don't really know the law (they're rarely attorneys in those states), and are too reluctant to refer a client to a real estate (or bankruptcy) lawyer when it would make sense. Sometimes, sadly, the most well-meaning are the most dangerous because they want to give good advice, but the advice is either wrong, or incomplete.

42 posted on 03/28/2011 8:34:51 AM PDT by CatoRenasci (Ceterum Censeo Persae Esse Delendam -- Forsan et haec olim meminisse iuvabit)
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To: HereInTheHeartland

‘Market rate is now higher for everyone. Check out what PMI has done in the past couple of years for example. “

Well perhaps we should all do a class action against the banks for the fraudulent, illegal, and downright stupid business practices they had for the last 10 years.


43 posted on 03/28/2011 8:35:35 AM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: CodeToad

The IRS was forgiving 1099’s from banks last year.


44 posted on 03/28/2011 8:38:21 AM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: driftdiver

“we should all do a class action against the banks for the fraudulent, illegal, and downright stupid business practices they had for the last 10 years.”

Well not being argumentative; but what have they done to hurt you?

Bottom line is that the market place has cleaned up most of the problems already in my opinion.


45 posted on 03/28/2011 8:41:30 AM PDT by HereInTheHeartland (Yes We Can, have smaller government)
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To: Notwithstanding

Just deed the property back to whoever the assigns is and walk. There is no foreclosure so there can be no deficit. Make sure you take lots of pictures of the property with witnesses when you leave, and call the local cops and inform them it is vacant.


46 posted on 03/28/2011 8:46:08 AM PDT by org.whodat
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To: NonValueAdded
"There is a way you can ask the bank to waive or forgive the deficiency as part of the short sale but if not done properly, it sets up a big slug of taxable “income.” "

As of end of 2007, Chuckie Schumer law, which was retroactive, any deficiency forgiven as unpaid debt on primary residence under $500K is NOT taxable income.

I know because it happened to me.
47 posted on 03/28/2011 8:48:57 AM PDT by time4good
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To: driftdiver
The IRS was forgiving 1099’s from banks last year.

Cancellation of debt income will be in effect through 2012, but ONLY on mortgages for personal residences. Check the regs, as the amount is limited.

48 posted on 03/28/2011 8:51:26 AM PDT by Night Hides Not (If Dick Cheney = Darth Vader, then Joe Biden = Dark Helmet)
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To: Outlaw Woman

Best rule of thumb, never trust a realtor, they misrepresent both sides, and are in it for the money. Hire an attorney in a short sell. Never let they property go to foreclosure, deed it back.


49 posted on 03/28/2011 8:51:51 AM PDT by org.whodat
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To: CatoRenasci

You’re right. I’ve worked with Realtors that are dumb as a box of rocks and will say/do anything while keeping an eye on only their ‘fee’ ‘commission’.

The first thing I have done (not too active at the moment) regarding a short sale is to prepare the client(s)mentally and tell them that I am neither an attorney nor a CPA and that they should seek the advice of those professions. However, there are some things that Realtors can do and should do (imo).

The real estate industry is just as responsible for the current condition of the market as the lenders, banks and mortgage brokers (particularly the mortgage brokers). It’s a dirty, corrupt business and still is, with prices still being inflated over current value just to get the deal done.


50 posted on 03/28/2011 8:53:09 AM PDT by Outlaw Woman
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