Dave Halpern Louisville Short Sale Expert (502) 664-7827

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Can a Foreclosing Lender Take The Borrower’s IRA or 401(k) in a Short Sale?

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The summary answer is “NO”. A short sale is a voluntary agreement between the short sale lender and the borrower who is the selling the property for less than owed. The borrower is not obligated to accept the terms of the short sale or any of the lender’s demands.

Likewise, the lender is not obligated to agree to a short sale.

If the short sale lender stipulates that the seller must cash in their protected retirement fund and contribute it at closing, the seller should consult professional legal and tax advisors. The owner of a 401(k), IRA or other retirement device has both rights and obligations.

The SELLER Does Not Have To Agree To Anything – It is a Choice!

If the lender wants the borrower to break open their retirement fund to contribute towards the shortage, the borrower can refuse and opt for other courses of action including but not limited to foreclosure, bankruptcy or a variety of loan modifications.

Likewise, The LENDER Does Not Have To Agree To Anything – It is a Choice!

If the borrower refuses to bring their retirement funds to the real estate closing then the short sale lender needs to make a business decision if it’s better for lender to lose more through foreclosure or if the borrower files bankruptcy.

Here are some specific questions that the seller should ask a lawyer and/or tax professional:

  1. Is it legal for the lender to demand the borrowers break open their retirement account?
  2. If the lender obtains a deficiency judgment, is the retirement fund protected?
  3. If the borrower files bankruptcy, is the retirement fund protected from creditors?

With all that said, here’s an actual case study of a successful short sale we closed in Louisville, Kentucky:

  • Debt over $200,000
  • Highest offer $172,000
  • Seller, single mom, had $40,000 in her 401(k)
  • The lender wanted $10,000 seller contribution, told her to use her 401(k) which after taxes and penalties would leave her with almost nothing, especially after tough separation and divorce
  • Long story short: Seller said no, would rather file bankruptcy, lender backed off, short sale closed with lender waiving the deficiency.

Sellers should always seek the advice of professionals; Real estate agent who specializes in short sales, CPA or tax attorney and a bankruptcy attorney if the seller deems it necessary.

Dave Halpern

Louisville Short Sale Expert Realtors

If you owe more than your house is worth and you’re struggling with payments – please call Dave for short sale help (502) 664-7827

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The Importance of Using a Short Sale Expert

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 The Importance of Using a Short Sale Expert

By David Halpern, Louisville Short Sale Expert, (502) 664-7827 and (502) 895-3100

In my city alone there are hundreds, maybe thousands, of homeowners who unnecessarily lose their homes to foreclosure each year who could have avoided it if their Realtor would have successfully procured a short sale.

Even a highly trained short sale expert cannot stop a bank from defeating itself and not every short sale will get to closing. But it is the Realtor’s responsibility to diligently and methodically go through the dozens of extra steps that don’t exist in a traditional listing.

With the introduction of HAFA short sales the homeowner has the opportunity of receiving great incentives for successfully completing a short sale, namely mandatory debt forgiveness and a $3,000 cash payment from the lender. Realtors who fail to procure the short sale can cause their clients to lose these monetary incentives.

Realtors who are not thoroughly trained and don’t have the time, staff or resources to handle short sales should simply not take on this complex negotiation. The clients come first and it is imperative that they get the best chance of avoiding foreclosure.

If a traditional sale doesn’t sell in a timely manner the seller will endure some sort of inconvenience. However, if a client is facing foreclosure and the short sale doesn’t happen on time or doesn’t take place at all, the seller can suffer irreversible monetary and emotional damage.

Often Realtors feel obligated to take a short sale listing because of their friendship or prior relationship with the seller. Other professionals such as doctors and lawyers refer clients to specialists. Contractors bring in specialized subcontractors. Likewise, Realtors should refer their short sales to Realtors who are experts in this highly specialized field. This way their clients receive the best care and the referring Realtor still gets some compensation. The referring Realtor is still the hero because he or she was resourceful enough to bring in the expert.

Dave Halpern, Broker

(502) 664-7827

Dave Halpern successfully closes dozens of short sales each year in Louisville, Kentucky. Dave has helped many homeowners avoid foreclosure and bankruptcy by skillfully procuring a short sale for them. The seller has zero out of pocket costs. The foreclosing lender pays all closing costs and commissions on behalf of the seller. Many Realtors in the Louisville area refer and outsource their short sales to Dave due to his extremely high success rate.

Please check these testimonials from satisfied clients https://davehalpernlouisvilleshortsaleexpert.wordpress.com/category/david-halpern-testimonials/

How to choose the right Short Sale Realtor http://shortsalesrealtorslouisvilleky.wordpress.com/2010/03/21/short-sales-in-louisville-–the-right-realtor-makes-all-the-difference/

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