What is a co-owner’s liability if the house is foreclosed on but you are not on the mortgage?

My husband and I were added to the deed of my sister-in-law’s house 2 years ago. She has a mortgage and home equity line on the house in her name only. If she stops making payments and the house goes into foreclosure, will this affect me and my husband since we are on the deed even though we are not on the mortgage?

Asked on December 2, 2011 under Real Estate Law, Florida


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Your and your husband's liability as to any possible deficiency on the loan for the home that you co-signed for your sister-in-law would be determined if the loan was "purchase money" (original loan for the home's purchase) or a refinance and if your state has anti-deficiency statutes on "purchase money" loans.

Most states have such statutes where if the loan is "purchase money" the lender cannot go after any person who signed the loan if the home is foreclosed upon. I suggest that you consult with a real estate attorney experienced with forclosures on this subject.

Other issues to be explored is if the foreclosure is a nonjudicial or judicial foreclosure and if your state has some short sale statutes protecting property owners as in California recently enacted.

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