Real estate Q&A: Foreclosure on home jeopardizes rental properties ...
September 08, 2012 2:00 AM
QUESTION: I own a couple of rental properties out of state in addition to my primary home, which is worth less than I owe. I may have to let it fall into foreclosure, but can the lender get at the equity in my rentals?
? Jenifer
ANSWER: Yes. If your lender forecloses on your "underwater" home, the bank may be able to get a judgment against you for the difference between what you owe and the value of the home. Your lender can record the judgment in the public records and create a lien against your other properties in Florida. The bank can even "domesticate" the judgment in other states and use the domesticated judgment to get at your properties there.
Once the lender has a lien against your property, it may be able to foreclose that lien and have the property sold in order to pay off the judgment, with any remaining money from the sale going to you. Further, the bank also can use the judgment to try to collect the money owed by garnishing your wages, taking the money from your bank accounts or even taking personal property, such as a motorcycle or stock certificates.
Of course, there may be protections to the homeowner that vary by state. For example, it's very difficult to garnish the wages of the primary wage earner for a household with children or to foreclose on your homestead property. It would be much better to avoid all of this hassle by negotiating a smaller settlement with the bank or seeking a short sale or deed in lieu of foreclosure.
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Source: http://www.seacoastonline.com/articles/20120908-BIZ-209080306
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