Walking away from your underwater home, even temporarily, can have
serious consequences. Just ask Willard and Holly Brown, who lost
$116,000 by walking away from their house in Clarkston, Wash.
The Browns, who owned a home with a filed homestead exemption -- which
protects a home from creditors in certain circumstances -- fell into
some financial troubles with their company WW Cedar, based in Idaho.
Unable to pay back a $200,000 small business loan from Wells Fargo
secured by their home, they figured they were underwater between that
debt and their mortgage with Alaska USA mortgage
Company, so they walked away. Although they claimed they left
temporarily, the court ruled otherwise based on a contested series of
realestatesource.comÂ we've help many families and investors reposition themselves in today's real estate market and avoid foreclosure through short sales, call 312-788-7079
A homestead exemption is great for getting a deduction on your property
taxes, but it also can protect you from creditors to some extent, and
help determine the location of your primary residency.
But the key is, you have to apply for the exemption stating the home is your primary
home and you can't waive your rights to the exemption if you expect the law to work for you.Â In May or June 2008, the Browns terminated their utility services, including requesting a
"permanent shut off" of the water at the Clarkston house.Â They then began renting
a place in Florida. With a one-year lease signed, they obtained Florida drivers licenses and changed their vehicle
registrations with the department of motor vehicles. By September 2008,
they had also stopped paying their mortgage with Alaska USA.
A trustee for the mortgage company performed a nonjudicial foreclosure
on the property in January 2009. At auction, the home sold for
$116,377.85 more than was owed on the mortgage, which means the excess
goes to the Browns. At least it would under a homestead exemption.
But the Browns have the exemption, right? Well, that's where it gets
sticky. They say they were on an extended holiday in Florida and Wells
Fargo, said no, they abandoned the home and seized $116,377 to help
repay the business loan.
The court of appeals upheld the lower courts opinion, when, according to
state law, an owner is presumed to have abandoned a homestead when the
owner vacates the property for six months or longer. However, if owners
know they will be away for a while, they may execute and file a
declaration of nonabandonment with the county recording officer in the
county where the property is situated. The Browns failed to do this.
Check the homestead exemption laws in your state before you walk away or
forget to file an exemption. In Washington state, the Browns would've
have been protected up to $125,000 if they had simply filed a
declaration of nonabandonment.source: AOL
Short sale may be the best option
In most cases where the borrower cooperates with the lender through a short-sale or Deed-in -leau the banks are willing to forgive the deficiency or may ask the borrower to contribute a small portion to the sale. This is obviously a better option then walking away and thinking the bank will forget about you. From what I've seen out there they're coming after homeowners who walked away and they are coming with full force.Â In the event you need to short sale contact
us for a free consultation
and explore the best approach.
Coldwell Banker Residential
676 N. Michigan Ave. Suite 3010
312-788-7079www.Chicagorealestatesource.comDisclosure: This is not legal advise, please consult with an attorney for legal advise.