I have a seller who is doing a short sale with GMAC. He is worried that the lender will somehow attach his 401K as he does not have any liquid assets. Has anyone had any experience with this?
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The lender cannot attach his 401k unless he allows this property to go to foreclosure and the lender is able to gain a deficiency judgement. Even then, in most cases, the 401k is a protected asset. So short sale is his best protection. The lender cannot attach or even require funds from a 401k any other way. Your client should speak to an attorney in his area that is familiar with the collection laws in your area to find out if the lender could ever get a judgement against him after a short sale. In most cases the final settlement created in a short sale would preclude from ever touching any of his assets. They can view the 401k as an asset and request a contribution to the short sale, but they cannot require that the seller use funds from that account. They just simply tell us they see assets so the investor wants a contribution and he does not care where it comes from, but they cannot require or attach to the 401k.
Thank you Deborah
Ive had a lot of clients with sizable 401ks that have been disclosed and have yet to be asked for any of it.
Thank you Minna
A 401K is not a liquid asset. The seller may want to talk to an attorney or CPA right away. I don't beleive that they can attach it and don't believe they would even try. I have not had a lender ask for 401 K info in a long time
Thanks Jeff