Steve,

If a property owner has lost their job and can no longer make mortgage payments but also has a 401K for retirement, does a lender expect them to use up their 401K funds before approving a short sale?

Carol J.
Las Vegas, NV

Carol,

My understanding is that a debtor's 401K may be protected from collection. If so, why would he want to "feed the alligator"? A lender may "expect" someone to deplete all their savings and assets to satisfy a debt, but whether a client should do that or whether the lender is entitled to that is another story. Your clients should know their rights! Remember! I'm not an attorney, an accountant, or financial planner. I recommend seeking competent professional assistance.

On the other hand, Certified Short-Sale Professional Billy O’Keefe says, “From a practical standpoint the borrower does not have to do anything they do not want to do, such as use savings, 401k's, liquidate stocks, etc. to complete a shortsale. However, they have to look at what they are being asked by the bank and if it is reasonable it may be worth it. The bank can't make them contribute to the short sale, but the bank is also not obligated to approve it if they don't want to. It's all about choices. Personally, if I could get a client a ‘full satisfaction’ on a 2nd for 10% cash contribution, for example, it may be worth it all day, especially if you can get a buyer to help contribute a portion of it.”

Steven Kitnick, CSP, CNE, GRI, RRG
Steven Kitnick Seminars, LLC
www.NevadaCE.com