Dear Michael: My son and his wife asked if we could co-sign their loan for a new house. I have no problem doing it but would not want to endanger my assets. I am retired. I have heard that under California law, a lender’s collection in the event of default is limited to the real estate property securing the loan and the co borrower’s assets are not at risk. Is that true?
Answer: State laws vary widely. About half of the states have “judicial foreclosure,” in which foreclosures happen in court and lenders are allowed to sue borrowers when the proceeds of a foreclosure or short sale does not cover everything that’s owed, a gap known as a deficiency. Other states put restrictions on a lenders’ ability to pursue such debt. California is a “non-judicial foreclosure” state; its courts typically aren’t used for foreclosures and lenders normally aren’t allowed to sue homeowners over mortgages used to purchase homes. But the protection is limited if a homeowner has refinanced a loan and has a second mortgage, such as home equity loans or lines of credit.
When you have a second mortgage, the chances are greater that you’re going to get sued. Just the fact that a lender can sue you, however, doesn’t mean that they actually will. There are no statistics showing how many lenders are pursuing borrowers for debt, and some say the lawsuit threat is overblown. Lenders often don’t pursue borrowers for deficiency judgments because it’s usually not economically worthwhile.
Dear Michael: I sold my home without a Realtor about one year ago. At the time of the sale, my plumber checked the plumbing and everything was fine and the buyer agreed to purchase the home as is. The buyer is now asking for a refund of $1,500 for plumbing repairs relating to water pressure. No forms were used when the transaction was done.
Answer: Although your situation does not seem very threatening at this time, it can possibly have a domino effect that could lead to a potential lawsuit. This is why a Realtor should always be used when selling a home. If your plumber checked the water pressure and everything was fine, your invoice may or may not save you. A physical inspection should have been done and a request for repairs should have been submitted in writing to you. The buyer did not sign an acknowledgement and, therefore, may say that they never saw the invoice and were not told that everything was fine and dandy. Then it would be your word against buyer.
Signatures would have served as proof that the matter was resolved and accepted by both parties. When a real estate transaction occurs, it is very important that everything be done in writing.
Dear Michael: I am getting ready to list my house. I have certain fixtures that I am emotionally attached to and do not wish to give up. Is there a clause in the listing contact that can leave these items out of the sale?
Answer: The correct definition of fixture is “anything that is attached to the property that is considered to be permanently established in a place or position.” If a buyer walks into your home while your property is listed for sale and discovers that a fixture is no longer there after that first visit, you may have a problem. In order to avoid this, have any fixtures that you wish to keep be replaced before you start showing your home. I have seen transactions cancelled because of such disagreeable situations that could have been avoided by simply planning ahead.
Ask your Realtor about any concerns you have in regards to any fixtures before showing your home.
Michael Kayem is a Realtor with Re/max/Execs, serving Culver City and the Westside since 2001. Contact him at (310) 390-3337 or homes@agentmichael.com.
