Deficiency Judgment & Tax Liability Attorneys in Woodland Hills
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Buying a home can be seen as an opportunity and an investment, but also a gamble. An unpredicted downturn in the economy or housing market can leave a homeowner owing more money on their home than it is currently worth. A bad economy can also cause the homeowner to have difficulty keeping up with their house payments. This can lead to the struggling homeowner’s lender foreclosing on their property. If you are in danger of foreclosure, it is vital that you speak to an experienced attorney.
The legal team at Cal West Law has spent more than two decades counseling homeowners who have fallen on hard times. Call today for a free case evaluation at (818) 446-1334.
Short Sale & Deficiency Judgments
One way to avoid foreclosure is to sell your house at the current market rate, even though it is less than what you bought it for. This is called a "short sale."
Here is an example: Five years ago, you bought your home for $500,000. You made a $50,000 cash down payment and took out a mortgage for $450,000. The market then collapsed, and today your house is valued at only $250,000. Unfortunately, you still have $400,000 left to pay on your mortgage. If you were to short sell the house for its current market value, you would be leaving the lender with a deficiency of $150,000. Sometimes, when a house is not devalued very much, a lender will encourage a short sale and write off their loss. Other times, a lender will go to court and get a deficiency judgment against the borrower. In this case, a lender could seek a deficiency judgment against you for $150,000.
To avoid a deficiency judgment against yourself, it is important to negotiate an agreement with your lender before trying to short sell your house. What you want from the lender is a signed "Deficiency Waiver," freeing you from being responsible for paying back your deficiency. Larger banks are more likely to grant deficiency waivers to borrowers because it’s easier for them to absorb the cost. Smaller banks are more likely to pursue deficiency judgments. If you are considering short selling your home, consult an experienced attorney first.
We strive to make the bankruptcy process as smooth and simple for you as possible. Reach out to our firm today to schedule a free in-person or virtual consultation today.