Cait, Home Seller in Altamonte Springs, FL

Options when short sale, deed in lieu, or re-fi are not available? How can we avoid foreclosure?

Asked by Cait, Altamonte Springs, FL Fri Mar 5, 2010

My long-term boyfriend owns a property in FL -- he had a job relocation and therefore had to rent his property out. Unfortunately, after a year nobody will rent it because the rent price is too high for the area. He cannot go any lower as he is already making up the difference each month to catch up on his mortgage payments. His bank will not work with him on a short sale, deed in lieu, or re-fi because his property is considered an "investment" as it is not his primary residence (although he lived in it for two years and intended it to be so before he relocated jobs). He is sinking further and further into debt and despite my attempts to help, I will soon fall into debt as well. Does he have any options besides foreclosure?

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Hardship can be job loss, job relocation, death, divorce, financial and yes investors can short sale, currently doing one now that has multiple properties.

Some banks like to play hardball just to get you to continue to pay the mortgage knowing you are sinking, they don't care about your outcome just theirs.

Knowing the home more than likely go into foreclosure they will drain your finances to get every penny they can. I’ve seen it over and over banks accounts drained, then what.

Get your property listed as it is the first step while collecting needed paperwork and again get an attorneys thoughts on the subject.

Hope this helps,

Broker Dave
GRI, ePRO, Real Estate Broker

Community and Family Values
Web Reference: http://OrlandoHomeStore.com
0 votes Thank Flag Link Sat Mar 6, 2010
I also say contact an Attorney to get legal advice and I wouldn't let anyone on the deed without signing the note over to them also.

Just went through a short sale that had an investor on the deed and he fought all the way to the end causing the sale to take much longer than it should have.

Have another now that one of these rescue firms that set themselves up as a trustee on the deed and he again will not allow the sale to go through without paying him 'X' amount of money.

Here is a link with some 'Tips to Avoid Scams' http://www.makinghomeaffordable.gov/beware.html

I know he explained the situation to the bank what did they say about the job relocation? I've done a number of short sales based on a job relocation. Is there a only one mortgage or is there a second?

If you can show a true hardship you can short sale, it will ding your credit for a while and you may/will end up with a note for the difference but that will be a lower monthly payment than loosing as much as you are now.

Hope this helps,

Broker Dave
GRI, ePRO, Real Estate Broker

Community and Family Values
Web Reference: http://OrlandoHomeStore.com
1 vote Thank Flag Link Sat Mar 6, 2010
The reason why a refi, deed in lieu and modification will not work is understandable because the bank is not identifying a hardship. Why do you sale that the short sale is not an option? With the short sale you might be responsible for the short fall (deficiency) however, it might be on better terms than you currently have. It depends on the lender but I would contact the lender again to see what your options are and what the mortgage document indicates. Of course the lender does not have to help anyone but it better to try something rather than nothing. Review what you wrote as your hardship and make sure it outlines the situation.

I am not sure if a lawyer is going to get you any further than you are, but in Wisconsin there are mediation groups that can get hold of a bank to make sure someone looks at your situation and at least you feel like someone really looked at it. Not sure there is the same type of service in Florida but in Milwaukee it is tied the the law school.


Good Luck

Keith Manson
First Weber Group
Certified Distressed Property Expert
Metro Milwaukee
0 votes Thank Flag Link Sat Mar 6, 2010
Thanks for your help!

Dave -- He has two mortgages, both through the same bank, and Fannie owns his loan. They said despite his relocation, it's still an investment property, and they won't do a short sale or deed in lieu because it is not his primary residence. Perhaps this bank is more strict than others?
0 votes Thank Flag Link Sat Mar 6, 2010
Cait:

Ask your boyfriend to contact the Realtor Association for the county in which his property is located. Ask them for a list of Affiliate Real Estate Attorneys. Some of these attorneys will likely offer an initial consultation for free. That is the best option a this point. Only an attorney can give legal advise.

Tony Vega
Charles Rutenberg Realty
0 votes Thank Flag Link Fri Mar 5, 2010
Thank you all for your help!

Don -- I apologize, my description was vague. He has not worked out a loan modification with his bank. He filed a hardship package with his bank and they denied him every option. What I meant by "making up the difference" was that he is losing a lot of money each month because the rent is (obviously) not as high as his mortgage payments. If he rents it out for even cheaper, he will soar further into debt. He has negative equity -- the property is worth around $40k less than what he owes. And he continues to pay his bills/rent/etc up here (funny -- we are in Fairfax with you). We are trying to get a feel for our options because he definitely does not want to foreclose or file bankruptcy -- is there an end in sight? Or is the best option to continue renting it out and accruing more debt?

Thanks again for everyone's help!
0 votes Thank Flag Link Fri Mar 5, 2010
You can do a short sale on an investment property, but there may be different tax liabilities than if it was his primary residence. Sometimes short sales are denied because they bank thinks you can afford to keep the home, make too much money, or there is no hardsip. Talk to an agent and see if they can work with the lender on what other options you may have.
0 votes Thank Flag Link Fri Mar 5, 2010
I disagree with Don. We just went thru this on an investment property that we owned. We ended up doing a deed in lieu but only after filing bankruptcy to protect ourselves from having to pay the difference of the auction price.

Bankruptcy, and Credit Counseling stops foreclosure in most cases. Chapter 11 Bankruptcy is simply a reorganizing of your debt. This will stop foreclosure and force the bank to work with your bankruptcy trustee to come up with a solution. The trustee may decided that his income is not enough to pay all of the debt but you don't have to list all of your debt in a bankruptcy, only the debt you would like to reorganize. If the trustee decides that his income is not enough to cover the debt a sale will be forced upon the bank, or a deed in lieu, and at that time you will be protected by the bankruptcy. Laws vary in every state, so check with your local free legal aid.

Foreclosure and bankruptcy both take months to finish, and they will both affect your credit negatively, but it may be alot easier to start from scratch and work out an arrangemeny. Don't be scared to take measures that protect yourselves! Have a great weekend!
0 votes Thank Flag Link Fri Mar 5, 2010
Gotta agree with Don on this one. I would suggest working on a "subject to" arrangement with a savvy real estate investor. I used to work with a few, email me if you would like a more information.


Jennifer De Vivo
The De Vivo Team
jennifer@devivorealty.com
http://www.devivorealty.com


For more help call me direct at 407-921-1310
click on my Pic to read my bio!
Web Reference: http://devivorealty.com/
0 votes Thank Flag Link Fri Mar 5, 2010
No.

Not with the conditions you've laid out.

Let's throw some hypothetical numbers around. Let's say his property would rent for $1,000 a month. But it's vacant "because the rent price is too high for the area." Let's say he's asking $1,300 a month and he really has to pay $1,500 on it. You say he can't go any lower.

Let's look at the numbers. If he rents it out, he loses $500 a month. If he leaves it empty because he's asking too much, then he's losing $1,500 a month. Hmmm. Seems as if he'd be in better shape renting it out at a loss than asking too much and leaving it empty. But if he won't lower the price and at least bring some money in, it'll keep sitting there vacant.

So: Lower the price.

Next, you say he's "already making up the difference each month to catch up on his mortgage payments." That sounds as if he fell behind and he and the bank worked out some sort of loan modification. But then you say "His bank will not work with him on a short sale, deed in lieu, or re-fi." Sounds as if they've already given him a chance.

And, yes, from the bank's perspective it's an investment property. It's not his primary residence.

He might also consider selling to an investor doing a "subject to" If the numbers can work. Essentially, he'd deed the property to the investor. The investor would make the mortgage payments.

If there's any equity (I'm guessing there isn't), he could sell conventionally.

That's about it.
0 votes Thank Flag Link Fri Mar 5, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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