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Saturday, March 15, 2014

new law targets slumlords but extends to far with unintended consequences

The new law hurts property owners in financial distress who are willing but unable to pay, said Diane Cipa, general manager of The Closing Specialists title insurance agency in Western Pennsylvania.

Cipa said many property owners and real estate professionals are unaware of the change, and she has written several online commentaries criticizing the law’s ramifications.

Attempts to liquidate individual properties will be hampered if tax debt on other properties is linked, she said.

She predicts mortgage lenders will reject short sales and deeds in lieu of foreclosure if properties come with back-tax baggage that has nothing to do with the mortgage transaction.

With a short sale, the owner must convince the lender to reduce the mortgage amount so the property can be sold. Lenders may allow normal closing costs but probably won’t agree to eat taxes on unrelated properties, she said.