attorney Marc McCain
BORROWER’S 1, LENDER’S 0
In a recent case handled by local business and real estate attorney Lance Davidson, a borrower prevailed in a lawsuit brought by the borrower’s lender seeking a deficiency after the borrower sold the home at a short sale. In the lender’s approval letter, the lender included a clause that stated it reserved their rights to pursue a deficiency following the short sale. In a Motion to Dismiss, Mr. Davidson convinced the court that such an action was not appropriate under Arizona law and was awarded attorney’s fees. The lender did not appeal the decision, thereby ending the ordeal for the borrower, much to their delight.
This case highlights the hot topic in the Arizona real estate market regarding Arizona’s anti-deficiency laws and their application to short sales. While some counsel may argue otherwise, the apparent predominant view is that short sales will get anti-deficiency protection provided the anti-deficiency requirements are otherwise met and provided the facts do not present the lender with a solid argument otherwise (such as an express waiver of anti-deficiency protection). However, certain issues in this area remain unresolved under Arizona law and aggressive bank counsel argue that short sales get no protection absent an express release by the lender as part of the short sale approval. Given the number of short sales in Arizona, this issue is almost certain to be heard in Arizona courts over the coming years.
Marc McCain, Esq.
Disclaimer: nothing in this article or site is intended to be, nor should it be considered, legal advice. Every situation can present unique facts or circumstances that must be analyzed. An attorney-client relationship exists only after a client has a signed fee agreement with McCain&Bursh, PLC.