Real Estate Agent Disputes
Real Estate Judgments – Helpful Information
What are Real Estate Judgments?
Real Estate Judgments are court orders that a homeowner or borrower may receive in regard to a piece of property that is currently or previously owned. These judgments usually order the person who receives them to pay more money regarding a piece of property.
Many times the person who receives the real estate judgment is not aware that they may owe more money on a real estate issue that they thought was long resolved.
Who is affected by Real Estate Judgments?
There are many types of real estate judgments but the ones that usually catch people by surprise have to do with either a home that was foreclosed and sold at auction or a home that was sold through the use of a short sale where the homeowner signed a contract promising to remain liable but didn’t realize it due to poor or negligent advice.
In some cases a person may also receive a real estate judgment after being involved in a deed in lieu of foreclosure agreement with their lender if it wasn’t negotiated properly.
In most cases people are surprised by real estate judgments because they did not use a skilled and knowledgeable attorney when going through the foreclosure, short sale or deed in lieu of foreclosure process. It is best to have a skilled attorney take the lead with any of these complex real estate situations but you should at least have the paperwork reviewed by an experienced attorney before going through with these transactions.
How does the Real Estate Judgment process work?
The two main situations that cause real estate judgments are when a home is foreclosed and when a short sale goes through. Each of these is discussed below:
Real Estate Judgments – Foreclosure: The people that get into trouble after a foreclosure are those that had taken out a home equity line of credit or some other kind of refinance after the original date of the purchase. In California, the holder of a second mortgage (or third, fourth, etc) aka junior lien can still come after a borrower for money, even if a foreclosure and sale at auction has already occurred.
Real estate Judgments – Short Sale: Real Estate Judgments resulting from a short sale can happen in the same way that they occur after a foreclosure. The holder of a second, third or fourth mortgage on the property can legally come back for compensation from the original borrower. If the subsequent lenders (2nd, 3rd, etc.) are not included in the short sale agreement in a legally binding way, a person may be opening themselves up to a future real estate judgment.
The difference between the amount owed on the loan and the home sale amount during as short sale is called a deficiency. The lender may or may not waive this deficiency. If the deficiency is waived by lender, the seller in the short sale transaction does not have to pay the deficiency in the future. If the lender fails to waive the deficiency in a legally binding way, the seller could have to pay this back in the future.
Deficiency Judgments in Short Sales, Can You Walk Away?
It is a common myth that California is a “non-recourse” state in that if you sell your property for less than you owe or if you foreclose on it, your lender(s) cannot come after you and you can walk away. Unfortunately this is not entirely true. While there are some situations and circumstances that would preclude a lender from coming after you there are far more that allow them to (even in California). We get calls all the time from homeowners who either foreclosed or did a short sale a few years ago and now their lender is suing them. You need to use a top short sale attorney and short sale agent to negotiate and close your short sale.
Most of them are completely shocked; some of them even had their real estate agents advise them to sign contracts, without the advice of an attorney, holding them liable by telling them that after the short sale they would not be liable…when they were! We have seen many people forced to file for bankruptcy when if they had the proper representation in the first place regarding their real estate decision, they never would have had to.
When a successful short sale is negotiated, the agreed upon price is considered settled as payment in full. The lenders are not allowed to come after the homeowner after the short sale and we make sure that we get this in writing. It is not the same case with a foreclosure, so if you are thinking about letting your home foreclose please call us first.
Judgment Liens
Once a mortgage lender has obtained a deficiency judgment against you, it can then proceed to collect on that judgment. If the mortgage creditor was a junior lien holder in the foreclosure, it is more likely they will pursue collection efforts, especially if they received little or nothing from the foreclosure sale.
The mortgage lender can get a judgment lien against your personal property and other real estate that you own within the county, giving it a security interest in that property. This means the bank can foreclosure on that other real estate — it might do this if you have equity and the bank thinks it’ll get enough money to make the effort worthwhile. Even if you own real estate in another county, the mortgage creditor can transfer the judgment to the county where the real property is located.
With a deficiency judgment lien, the creditor also has an interest in any personal property that you owned at the time it filed the judgment lien (subject to any available exemptions you may have). This includes jewelry, equipment, business assets, art, antiques, electronics, and any other valuables.
Wage Garnishments
Just like any other lien creditor, the mortgage creditor can take part of your employment income (often called garnishing your wages). If creditor knows where you work, it may go the garnishment route.
There are some limits as to how much money can be garnished from your income, since you are entitled to exempt some of your personal income. Under federal law, creditors can usually only garnish up to 25% of your take home pay (less for low-income wage earners). There may also be limits on how long they can continuously take money out of your paycheck.
Bank Account Levies
The mortgage creditor may also attempt to levy your bank accounts. This may be relatively easy for them to do if you had previously paid the lender with checks drawn on an open bank account. As with your other assets, you may be entitled to exempt a portion — if not all — of the funds in your account.
Will the Lender Try to Collect the Deficiency?
Just because a mortgage creditor has a deficiency judgment does not mean it will try to collect. Many creditors find that it is just not worth the cost and expense to pursue collection, and instead write-off the debt and issue you a 1099-C. If this happens, you might owe taxes on the forgiven amount.
If the Lender Does Try to Collect
If the creditor thinks that you are collectible — for example, because you have steady income or assets, or because they are being aggressive — it may take further collection action on the deficiency judgment. If you cannot successfully protect yourself and your assets using defenses and exemptions specific to wage garnishment, levies, attachment, or foreclosure, consider filing bankruptcy. If bankruptcy is not an option for you, you may be able to work out a payment agreement or settlement with the creditor.
Vacating Default Deficiency Judgments
If the creditor had taken a default judgment against you and you were unaware of the deficiency case or were unable to defend yourself, you may be able to get the court to vacate (remove) or modify (change) the deficiency judgment. You must act quickly and have acceptable legal and factual reasons for this request. For example, the creditor waited too long to take a deficiency judgment and violated the statute of limitations, which is often shortened in mortgage deficiency actions. Because this can be a complicated, difficult procedure, you should consult with an experienced attorney.
We are experienced Sacramento Real Estate Attorneys and Sacramento Realtors. We are a unique and powerful combination and can help you with your real estate legal issues. We have helped thousands of people with pressing real estate issues find solutions and relief through the use of short sales, deed in lieu of foreclosures, strategic foreclosures, mortgage debt settlements and legal real estate review and advice.
Our real estate attorneys have achieved proven results and can give you the great legal advice and strategy needed to get you the results you want. Contact us today to schedule your complimentary attorney consultation by clicking HERE or by calling 916-757-6000. We look forward to helping you with all of your Sacramento real estate needs.
