Short selling: You better not own more than 2.5 acresPosted: Updated:
CAVE CREEK, Ariz. – Kimberly Fisher has a little slice of heaven just outside of Cave Creek.
"It's quiet. It's quiet and it's peaceful. Life is good up here typically."
But life isn't so good anymore after the housing market tanked, making it impossible for Kimberly to refinance and keep up with the monthly payment on her house that sits on five acres of land.
Kimberly and her husband decided to short sale their home and after securing a buyer, Kimberly's lender, M & I Bank, sent a letter saying the short sale and purchase amount were approved.
"They just recently, in the last couple of weeks, they approved the short sale and we were like "Yeah!"
But inside the approval letter was a little paragraph from M & I Bank stating they had the right to sue Kimberly and her husband for the rest of the money reportedly being forgiven.
In Kimberly's case, her $500,000 mortgage was approved to be short sold for around $250,000 but M & I claims it would sue Kimberly for the remaining $250,000 short fall.
Dean Wegner has been in the real estate industry for years and is a frequent contributor to 3 On Your Side. He says Kimberly's problem lies in a little-known clause in the state law that says if property is more than 2.5 acres then the lender can and will sue homeowners for any balance left over.
Kimberly's property is five acres. "So really, it's like kicking someone when they're down."
Lenders, like M & I, are now using the clause in the law to their advantage when it comes to larger properties and, according to Dean, M & I is one of the most aggressive lenders going after homeowners.
He says it's a shame. "That's what it really boils down to. They don't care about the homeowner or the family inside. You are just a number and the law says 'We can sue you.' "
Kimberly says she never knew about the law until she tried short selling her home. "The people who own more than 2.5 acres need to know they are not off the hook if they short sale," Kimberly tells 3 On Your Side.
Remember, it’s not just for homeowners who are short selling. If you own more than 2.5 acres and are losing the home to foreclosure, financial institutions will probably sue you for the balance after the auction.