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Beware. Do Anti Deficiency Laws apply to your Mortgage???
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If you are considering Foreclosure or Short Sale you have probably heard the term Anti Deficiency State. Yes, here in Arizona we are an Anti Deficiency State, but it is important to consult a qualified Real Estate Attorney. No, not a Real Estate Agent, an Attorney. Shame on any Agent, no matter how qualified as an Agent they are, if they tell a homeowner anything, but get advice from a qualified Real Estate Attorney.

Something to think about.

Is your mortgage a Purchase Money or Non Purchase Money Mortgage? Put simply, did you use the money to buy the home in which the mortgage is attached to? Is this the original mortgage, or did you refinance? Is there a second or Junior Lien on the home?

The list of questions is deep and all should be explored before a homeowner embarks on the path of foreclosure or short sale.

Basically, any money from a loan that was obtained by using the home as collateral, but was not used to actually buy the home, is considered a NON Purchase Money Mortgage, i.e. Home Improvement Loans, Equity Lines of Credit, etc.... If a homeowner forecloses or short sales on a home and there is not enough money to pay off all of the liens against the house, the Junior Liens, or second mortgages will not be wiped clean if they are NON Purchase Money Mortgages and the creditors have the legal right to pursue that money from the homeowner for in many cases up to 20 years if it is written into your original loan documents as such. This is why consulting an experienced Real Estate Attorney is so important.

I believe it is perfectly reasonable for an experienced Real Estate Agent to initially consult with a potential foreclosure or short sale candidate as a first step. A good realtor could eliminate your eligibility with no out of pocket expense. However, if things on the surface look promising for the homeowner to pursue a foreclosure or short sale, the next step is to talk with that Attorney before proceeding on.

While there are many other things to be considered, there are to many to mention in this post so I will be coming back to this subject on future posts. Check back periodically for more updates.

As always, thanks for reading.


Ken Cuellar

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