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Roger
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Category: Real Estate Law
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Me and partner bought a fore closure property in Virginia 3

Customer Question

Me and partner bought a fore closure property in Virginia 3 years ago.Originally the property belong to the person who defaulted the payment,with the help of a Realtor who is a common friend of us got the property on short sale.Real agent put the property for short sale.We bought with cash.Since the original owner very much adamant in getting back this property,as a matter of fact he is living on this property for a modest rent even after short sale and does not want to give up the property.

My partner who paid less than one third of the payment,wants to give back to original occupant,on the same prize as we bought originally.

My argument to partner,original owner and involved real estate agent is this transaction is illegal to sell back this property to original owner is improper because he borrowed the loan from Bank.Bank has incurred a loss and now getting back this property on the same short sale prize.

I want to know the legal implications of selling this property to original owner or his relatives.

Mohammed
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  J. Warren replied 1 year ago.
Hello! Thank you for your question today. My goal is to provide you with the information you seek.

Please note: (1) this is general information only, not legal advice; and (2) I will provide you with honest information and not necessarily to tell you might be hoping to hear.

I appreciate you situation and dilemma. First, you need to review the transfer/purchase documents you signed at closing. Most short sales have the buyers sign an addendum stating they buyer does not intend to sell back the property to the original owner/borrower or that the original owner may not benefit from the transaction other than being released from underneath the original loan. Most of the arms length affidavits expire near 3 years but it is contract/document specific and if no expiration than a court will determine what is a reasonable time.

So if there was an affidavit signed and it is breached then the lender could accuse you and the partners of fraud and seek to find you liable and recover damages such as the amount of money lost in the transaction.

If no such addendum was signed (which would be unusual) or the expiration of time has expired, the risk is lower that the bank would prevail against you and the partners. However, if the lender believed this transaction was not at arms-length to begin with and that it was intended all along to sell back to the original owner, the lender could still assert a cause of action. As long as the people involved are not related or have business interest together (meaning the original owner is not part of the partnership) and an affidavit is expired or not executed the transaction would be permitted unless there was intent to defraud the bank to in the beginning.

Regardless of the legality of this transaction, morally it doesn't feel right to you as the original owner promised to repay and then failed to do so. In this situation, if the partners are insistent on doing this transaction and you do not want to take the risk or it does not sit well with you, an option is to have them purchase your interest in the partnership and then they can take the risk of selling the property without you.

All my best & encouragement.

Please note that you are asked to rate my courtesy and professionalism, and not whether the answer supports your legal position. I only receive credit when rated 3 or higher. If for any reason you feel that a low rating is appropriate, please first give me the opportunity to address your concerns by clicking the "reply" tab.

All states have intricacies in their laws and any information given is simply information only and specifically is not intended to be, nor does it constitute, legal advice. This communication does not establish an attorney-client relationship with you.







J. Warren, Lawyer
Category: Real Estate Law
Satisfied Customers: 1349
Experience: Experience in residential real estate and commercial leases.
J. Warren and 9 other Real Estate Law Specialists are ready to help you
Customer: replied 1 year ago.
Appreciate your expertise.My pointed question is in reference to Virginia Law,not general and vague response.I'm still confuse as what to do.Other question,Is the real estate has any moral, ethical and legal responsibility.He/She knows rules of the game.If real estate agent is honest and upfront then we will not be talking.

If you can little bit precise abour Virginia law
Expert:  J. Warren replied 1 year ago.
I understand your concerns and I will opt out for another expert to assist that is more familiar with Virginia law. However, what governs this is the affidavit signed at closing and the time line in which that document refers to. If the transaction was at arms length then there is no law prevented the sale. However the affidavit will control th subsequent actions of the parties. Also the IRS will be interested in whether rents have been at fair market value if the sale is at fair market value.
Customer: replied 1 year ago.
Appreciate your expertise.My pointed question was Virginia Law for foreclosure property,related to lander's going after.The second question is the real estate agent ethical.moral responsibility.He/she was present before and now.They are also very vague and not upfront.

If you can clarify these two points
Expert:  Roger replied 1 year ago.
Hi - my name is XXXXX XXXXX I'm a Real Estate litigation attorney. What the other expert has told you is correct.

There is NO state or federal law regarding who can or who can't purchase short sale, or who can live there, or whether a short sale buyer can then resell the property.

HOWEVER, most mortgage companies impose conditions on the transaction to ensure that it is an "arms' length transaction", meaning that there is no relationship between the buyer and seller. As part of many (maybe all) short sales, they require a sworn affidavit to that effect.

Thus, whether you would be looking at legal liability depends on what your agreement with the lender was at purchase. You can review your loan documents and contractual agreement to see what you've agreed to. Also, before going forward if you think all is clear, I would recommend that you have a local attorney review the loan package to make sure you're ok, especially since MOST lenders place conditions on the transactions to keep this from happening.
Roger, Lawyer
Category: Real Estate Law
Satisfied Customers: 27249
Experience: BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
Roger and 9 other Real Estate Law Specialists are ready to help you
Expert:  Roger replied 1 year ago.
Thanks for allowing me to assist you, and please look me up again for your real estate law questions – I’m typically online every day. You can bookmark my profile here: http://www.justanswer.com/law/expert-kirkadams/Have a great day!

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Roger
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BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters