I would check with your lender and see if they would be willing to send you the died-in-lieu paperwork up-front, or just a 'sample' of their standard DIL forms, if they haven't already. That documentation should outline their terms of the died-in-lieu and how they want to handle the deficiency. You can then have your attorney review it and give you his/her advice.
Also, and I know it sounds simple, but ASK your lender how they handle the deficiency once a died-in-lieu has been executed. See if you can get that answer in writing from the person handling your file.
>Don't forget to ask them about a 1099 as well; they'll likely be sending you that form next year, after the died-in-lieu has been signed and the house delivered back to the bank.
Hope that helps!
Century 21 All Star, REALTORS
Great question for your BK attorney. They know your entire financial picture and can give you specific advice. Generally speaking a short sale is less damaging to your credit that a deed in lieu or outright foreclosure, but with a BK in process already it may not matter that much.
Your attorney will also be able to discuss including your home in your BK, which may be of some benefit.
Best of luck!
Best of luck to you.
To answer your question specifically regarding the deficiency on your mortgage that will be created with the short sale of your home or a deed in lieu of foreclosure, many homeowners/borrowers are not aware that Arizona is a "Non-Deficiency" State for short paid mortgages. This means that, unless there are specific issues in your loan agreement, which only your attorney can advise you on, the lender is prohibited by Arizona Statue 33-729 from pursuing a judgment against the borrower if the home has sold for a deficiency, an amount less than the mortgage balance due to a diminished value of the home (or secured property).
Specifically, Lenders are prohibited by Arizona Statute (33-729) from obtaining deficiency judgments in foreclosures where the land size is 2.5 acres or less and where the property was used as either a single one-family or single two-family dwelling. The actual language from the Arizona Statue follows:
Arizona Statute 33-729. Purchase money mortgage; limitation on liability
A. Except as provided in subsection B, if a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price, of a parcel of real property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling, the lien of judgment in an action to foreclose such mortgage shall not extend to any other property of the judgment debtor, nor may general execution be issued against the judgment debtor to enforce such judgment, and if the proceeds of the mortgaged real property sold under special execution are insufficient to satisfy the judgment, the judgment may not otherwise be satisfied out of other property of the judgment debtor, notwithstanding any agreement to the contrary.
B. The balance due on a mortgage foreclosure judgment after sale of the mortgaged property shall
constitute a lien against other property of the judgment debtor, general execution may be issued thereon, and the judgment may be otherwise satisfied out of other property of the judgment debtor, if the court determines, after sale upon special execution and upon written application and such notice to the judgment debtor as the court may require, that the sale price was less than the amount of the judgment because of diminution in the value of such real property while such property was in the ownership, possession, or control of the judgment debtor because of voluntary waste committed or permitted by the judgment debtor, not to exceed the amount of diminution in value as determined by such court.
The lender is prohibited by law from pursuing the shorted debt in normal situations. However, if the borrower signs a separate note to he lender for the deficiency, that new note would govern the deficiency balance owed on the debt. You have the law behind to ask for a full release of the deficiency amount.
Borrowers need to know that Arizona is a "Non Deficiency" State. Again, an attorney's advice should be obtained before you sign anything.
I hope this helps you.
Jeff Masich, RealtorÂ®
Arizona Homes and Land
HomeSmart Real Estate
Eli Givoni, Director
Short Sale Department, LLC
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Usually yes they can. Deed in lieu, doesn't have the same protection in AZ as a foreclosure.. You need to talk to a Real Estate Attorney.. call a realtor you trust they can refer you.