What is the process in handing back a rental property to a bank?

I owe approximately $10K more than my rental property is worth. It has a high negative cash flow. I can’t afford to make loan payments any longer. Can the bank come after me for the loan diffrence? It is in NC; I live in CA.

Asked on November 9, 2011 under Real Estate Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

1) There is no "process" for handing property--whether investment, commercial, or primary residential--to a bank, since there is no "right" to do this. You can contact the bank and see if they will voluntarily take the property back, whether in exchange for forgiving the balance of your loan or simply to avoid a foreclosure action, but they are not required to do this. If they agree to do it, they and their attorneys can guide you through the paperwork, though you'd be well advised to retain an attorney of your own.

2) Since the property is in North Carolina, North Carolina law applies--it doesn't matter where you live. North Carolina allows what's called "deficiency judgments," so at the lender's option, they could pursue you for the difference between what you owe on the loan and what the property brings in (after being handed back or foreclosed) when it is sold at auction.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.