If you are considering a short sale, then you probably have questions about your potential liability on the deficiency—the portion of the mortgage not covered by the sale of the home. This is a legal question, and legal questions require legal advice. Real estate agents are prohibited from giving legal advice. Unfortunately, many real estate agents may not realize that their recommendations or suggestions about your short sale amount to legal advice. What is worse, sometimes their advice is wrong. And if you relied on bad legal advice from your real estate agent, you could end up personally liable for the deficiency.
Here is a common example:
A real estate agent successfully negotiates with the bank to allow a short sale of your home. You ask your agent whether the bank will come after you for the deficiency. The real estate agent replies, “No. The banks are too busy to come after everyone. You will be fine.”
In this scenario, your real estate agent told you what you hoped to hear—that you are free to go on with your life without the burden of the deficiency debt. Alas, your agent was wrong. And if the bank sues you for the deficiency balance after the short sale closes, the bank could garnish your future wages to pay off the deficiency balance.
There are plenty of other examples where consumers have relied on legal advice from real estate agents and suffered the consequences later.
Remember, the laws change frequently. A lawyer will evaluate the facts of your case and provide advice about the legal consequences of your short sale. Knowledge of how the laws apply to your case gives you and your lawyer more power when negotiating with the banks.
Don’t forget, banks hire lawyers to protect their rights during the short sale process. You need a lawyer, too, to protect your rights during the short sale process.