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Loan modification with principle reduction gives owner equity---Owner says...SELL!

Posted by francisco Ramirez on June 13, 2013 at 6:37pm in Short Sale Discussions

An old client recently completed (4 months ago) a loan modification, with a significant principle reduction to his loan, giving him approximately 75k in equity. He now wants to sell.

What if any issues might he have by selling soon after his modification. I have not heard of a similar situation and was hoping to here from someone with some experience with this, any response would be greatly appreciated.

Thank you

Francisco Ramirez

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Replies

  • Mike Linkenauger June 19, 2013 at 4:08am

    Hilarious! Anxious to see how this works out!  Like others said, it is likely there is something in the fine print that insists the forgiven money be repaid if proceeds are received from sale of property within X amount of time, BUT, you never know...

  • Shari P June 16, 2013 at 9:03am

    Before your client attempts this, I think he should talk to a RE attorney. I would not want to assist in any possible claw-back by his lender.

  • Thom Colby CA Brkr 888-391-5245 June 16, 2013 at 5:25am

    I have seen one similar to this and it is just as Penny said below.  I recommend you get a copy of the executed Loan Mod and Principal Reduction documents and read them yourself.  Also, I would ask a title company to pull a prelim report to see if anything is recorded. Good luck !

  • PENNY BOUTTE June 16, 2013 at 5:04am

    If it was the Principle Reduction Program through Keep Your Home California, they put a lien on your home for the amount of the reduction, and if your home is not sold or re-financed for 5 years then the lien is forgiven.

  • Rodney Mason June 16, 2013 at 4:47am

    Situations like this is why mortgage companies are not readily giving principal reductions.  I would imagine that there are provisions in the modification agreement regarding the owner selling within XX number of years.  Those provisions will restrict sellers from walking away with money that is not really theirs.

  • Wayne Brooks June 14, 2013 at 9:12am

    Thabnks Bryan and Ron.  As I said, I've never been involved with one with the principal reduction, but it just made sense there might be some condition like that.

  • Wayne Brooks June 14, 2013 at 6:42am
    I doubt there are any restrictions, or "give backs", but they just need to read the agreement. It seems odd they would reduce far enough to give that much equity.
  • Wayne Brooks June 14, 2013 at 4:49am

    I haven't actually seen a loan mod with a principal reduction.  You need to read the actual modification agreement to see if there are any restrictions, or "give backs" on a sale within a certain time frame.

    • Jeff Payne > Wayne Brooks June 14, 2013 at 5:32am

      Wayne I have seen one and I am not sure if there is language that they can not sell for a period of time?

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