Foreclosure in Mason>Question Details

Bill Zircher, Real Estate Pro in 45208

Do home owner realize its in their best interest to short sale verses get foreclosed on?

Asked by Bill Zircher, 45208 Wed Aug 18, 2010

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Bill Polack’s answer
I have to agree with Joanna. People just don't know and there are a lot of people out there giving bad advice. Loan Officers tell people to modify because many do the modifications themselves and get paid for it. Sadly, I've talked to many people who modified their loan and Bob pointed out, their scores tanked. "Obama said my scores wouldn't drop if I modified my loan", said a friend of mine who voted for him. No comment. Anyways, short sales are something that I see Realtors push as a way to get people to sell their homes instead of foreclosing. However, banks are reluctant to do so because they are losing money. There are banks out there that made an agreement with the government to get paid on short sales to help make the short sale into a profit margin.

Short sales do affect the credit and sometimes the lender can require the owner pay the difference. So, after a person is told that they can't modify because they make too much, they can't short sale because the bank wants the difference, they are living on one income, depleted their life savings trying to hold on to the house, the bank is not helping them after all the money they sucked from the government, NACA is still 6 months away from coming to a city near them, it's too late for a deed in lieu of foreclosure, they don't have the income to get approved for a partial claim (put the past due payments back into the loan) or the equity is toast, they turn to an attorney to file bankruptcy.

Why? Because when a person defaults, bankruptcy attorney's go to the public records and send letters to the home owner's by the hundreds telling people that for as little as $495 they can avoid foreclosure and keep their home. Of course it will cost more than that when all is said and done.

Ah, but there are 2 places to go where many are unaware: CCCS and HUD. Consumer Credit Counseling is a non profit organization that will help people facing foreclosure. They have resources that can help the client receive aide in order to keep their home. Housing Urban Development will also help homeowners who have FHA loans. There is a pool of money sitting at HUD available to people under certain circumstances. If approved, money may be paid to the lender to help the homeowner. Why? Because FHA backs loan 100% against default and HUD doesn't want to give that kind of money away. So, it benefits them to help homeowner's.

So, I don't think it's so much the fact that people don't care, I think it's that they don't know the truth. They don't know what's out there and no one is spreading the word on where they can go for help.
1 vote Thank Flag Link Tue Aug 24, 2010
I think a lot of them are confused and bewildered and do not where to turn. Others have no clue about their options.

I do not like to see people let foreclosure happen either but I also have to stop and think that if an attorney is telling them to let it happen it is I HOPE - because they will not qualify for a short sale. I would hope they have went to the correct attorney for advice.
1 vote Thank Flag Link Wed Aug 18, 2010
Joanna,

Sadly your hope has not been proven right in my experience... The attorney is telling them that there is no difference between having a FC vs. a FC and a BK... I don't argue law but that it is just a FACT that having BOTH is way worse than just a BK... in fact a FC is about the worst thing you can have in terms of credit impact...

They are just ill-informed and/or lazy and do not want to deal with helping the clients...

My $.02...

Mark
0 votes Thank Flag Link Tue Aug 24, 2010
Everyone's situation is different. I have seen people a year or 2 behind on their mortgage before the foreclosure case even begins. From there, they wait until the week of the sheriff sale to get an automatic stay from filing bankruptcy which is sometimes an additional 6 months to 1.5 years from when the foreclosure case was filed. So, some people can live basically rent free for sometimes 2-3 years and choose not to hassle with a short sale as they already are going to have a bankruptcy on their plate. On the other hand, some people just do not have taxes filed or any of the other paperwork required to do a short sale.
0 votes Thank Flag Link Tue Aug 24, 2010
Unfortunately, some people just don't listen-- some do regret their decision after all is said and done, while others are not bothered at all or at least they don't appear to be.
0 votes Thank Flag Link Wed Aug 18, 2010
I find many just ignore everything, obviously the best solution would be a modification then short sale or deed-in-lieu-of, as of the June publication by Fannie Mae, but people just let it go and screw up their lives for many years to come.
The worst of it: many people, both before and after foreclosure, do not realize what any form of foreclosure (yes short sale and deed-in-lieu-of are forms of foreclosure in the lending industry) will do to their credit and future ability to obtain a mortgage limiting their ability to purchase a home again.

Bob Patrick
Buy a home after foreclosure expert
0 votes Thank Flag Link Wed Aug 18, 2010
Bill,

I struggle with this all the time. We do a large number of short sales and have divorce and BK attorneys all the time tell clients to just walk away... I wont argue the law with them but it is just a fact that a foreclosure is the worst thing that you can have on credit... way worse then a BK and if you have a BK AND a foreclosure that is the worst...

Will be interesting to see what other input you get on here...

Mark
0 votes Thank Flag Link Wed Aug 18, 2010
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