Q. I enjoyed your article regarding how to get out of a bad mortgage.
I was a victim of a mortgage fraud perpetration and got stuck holding the bag with four homes in 2008, of which I was able to negotiate a Deed In Lieu to get out of the two worst ones I had. Everything was done legally with help from a real estate attorney and all is recorded in both the Cook and DuPage county recorder's offices.
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It clearly says I was released from the lien(s). My question to you: What are the chances in Illinois for the banks/lenders to seek a deficiency even after they have released me from my lien with a Deed in Lieu of Foreclosure?
A. 735 ILCS 5/15-1401 of the Illinois Compiled Statutes states, in part:
"The mortgagor (homeowner) and mortgagee (lender) may agree on a termination of the mortgagor's interest in the mortgaged real estate after a default by a mortgagor. Any mortgagee or mortgagee's nominee may accept a deed from the mortgagor in lieu of foreclosure subject to any other claims or liens affecting the real estate. Acceptance of a deed in lieu of foreclosure shall relieve from personal liability all persons who may owe payment or the performance of other obligations secured by the mortgage, including guarantors of such indebtedness or obligations, except to the extent a person agrees not to be relieved in an instrument executed contemporaneously."
So, the statute provides you are relieved of the obligation unless you agree, in writing, not to be fully relieved and the writing occurs at the time the deed in lieu is executed.
There are, however, potential income tax implications in these transactions. It is always wise to speak to a real estate or tax attorney familiar with these proceedings prior to making any decisions.
Q. In February 2012, my wife and I agreed to a contract with the buyer of our house with a very short time to get a mortgage approved. With no appraisal from their financial institution and the deadline date past, our lawyer kept pushing them to further the process of purchasing our house. Their lawyer constantly said not to worry.
Time came and went without any progress. About three weeks after our agreed upon closing date of March 2, we informed the buyer she was in default of the contract and we were putting the house back on the market. At my lawyers direction, we let the escrow money stay with the Realtor since there was no communication.
Then, upon entering into another contract with someone else in early April, our Realtor said we had to return the first contract escrow money since it was corporate policy not to have two escrow amounts on the same house. Our lawyer disagreed and said it would be up to us to decide whether or not to release the deposit on the first contract. We verbally agreed to release the escrow money on the first contract.
Since then, within the five-day attorney review period, the second contract was voided by the buyer's attorney. We just think our Realtor was not looking out for us and we should not lose the escrow money on the first contract that was defaulted by the buyer.
Do we have a claim on the escrow money of the first contract or not? Was the position of our Realtor legal and ethical? If we change Realtors because of this, can we still claim all or part of the escrow monies? Buyer No. 1 has yet to respond to any correspondence.
A. I agree with your attorney that entering into a second contract should have no impact on the rights of the parties concerning the deposit on the first contract.
What you should have done was allow the deposit on the first contract to remain in the escrow account pending the successful conclusion to the second contract. At that time, you could then determine whether or not to release the first deposit. Most attorneys would have probably advised at that point that if you financially ended up in a similar or better position by completing contract No. 2, go ahead and return the deposit from contract No. 1. If, on the other hand, you lost money on the second transaction due to a lower sales price or other factors, then perhaps you either make a claim for the deposit or attempt to negotiate a division of the deposit.
All this, of course, is moot because you agreed to return the deposit and I presume that has occurred. As to the position of your Realtor, it sounds like she was quoting corporate policy, though it made no legal sense. Regardless, you don't take legal advice from your Realtor, you take it from your attorney, who gave you sound advice.
At this point, I doubt you have a claim as 1), you agreed to return the deposit, and 2), I am guessing as part of the deposit release, you executed forms releasing all parties from any further obligations.
• Send your questions to attorney Tom Resnick, 345 N. Quentin Road, Palatine, IL 60067, by email to firstname.lastname@example.org or call (847) 359-8983.