A cram-down is a strategy that is available in a short sale to eliminate the second mortgage from the equation through a Chapter 7 Bankruptcy. Essentially, a Cram-Down permits the debtor to avoid the lien of a wholly undersecured, consensual mortgage lien holder who was probably giving the most resistance to permitting he short sale(holding the whole process up). To illustrate, where a house has a fair market value of $450K and a first mortgage of $450K and a second mortgage of $50K, the second mortgage is wholly undersecured, and the lien can be removed and the debt discharged in bankruptcy. Therefore, the second mortgage has no say if the sale goes through. Sounds great, right? It also works well for mortgage modifications.

Yet, there is confusion if a Cram-Down is available in a Chapter 7 Bankruptcy. Specifically, there are 3 Center Islip Bankruptcy Judges, but only Judge Dorothy T. Eisenberg has permitted the use of a Cram-Down. Further, the other 2 Judges, Judge Robert E. Grossman and Judge Alan S. Trust, both expressly reject the availability of a Cram-Down.

Therefore, until a higher court rules on the issue or the legislature enacts a new bankruptcy law, there is ambiguity if this strategy will work. As of today, a debtor in bankruptcy has a 1/3 chance of this working depending on their luck of being assigned to the right Judge. That's a lot of risk for an expensive legal procedure. It makes it very difficult to advise a Cram-Down as the best strategy. If you desire to try the Cram-Down, I wish you good luck. Lets hope for clarity soon.

Earn 3 CE credits in our NYS approved course "Discovering the Home Inspection" with our special guest instructor from Housemaster, Matthew Kaplan. Go to www.liebatlaw.com to register today. The class will be held at 376A Main Street, Center Moriches NY, 11934 from 5:30 to 8:30 PM.

Its time to educate your bottom line!

For those of you who are interested in different real estate groups making a difference in Long Island, this one caught my eye.

Their mission includes addressing 5 main challenges in Long Island:
1) The property tax structure;
2) Affordable energy;
3) Public condemnation;
4) Affordable housing for a new generation of Long Islanders; and
5) Not in my back yard's regressive outcome.

To learn more about this association, please click here

Please know that I am not endorsing this organization as I am not too familiar with it beyond reading its website, but please share your thoughts if you are more familiar. It sounds like a good cause.

Did you know that a main street store with a door opening outward onto a sidewalk may be liable if a passerby is struck by the door?

Tip of the week - Make your door open into the building not outward.

A purchaser makes an inspection the morning of his closing to purchase a house. Unfortunately, he witnesses major water damage in the basement. Its unfinished so there isn't property damage, but water damage can render a structure unsound and create issues with mold, among other things. What should he do?

Adjourn the closing. That is really the only choice. Any other option is too risky. The purchaser is not an engineer or a building inspector and will not be qualified to know the extent of the damage or the amount a repair will cost. The purchaser should insist on an adjournment until the property is repaired by the seller and proof of same is offered to the purchaser. Yes, escrow is an option, but how much should be escrowed? Its a risk to guess. Also, a price reduction is nice, but again, how much?

If the purchaser wants the house regardless of this sound advise, the attorney and real estate agents should have him sign an informed consent letter that explains the above risks or they may face liability for allowing him to close with the house in this condition. If not in their wallet, definitely in their reputation.