Imagine that you are standing in front of a closed door, and I offered you the choice of keeping what you've got, or trading it all for what's behind that door.
This is not like "Let's Make a Deal" because I'mm going to tell you that what's behind that door is bad; You just don't know HOW BAD!
You've heard about it from other people, but you REALLY don't know.
Well, let me tell you, from what you've told us; YOU DO NOT WANT TO GO THROUGH THAT DOOR!!!!
If there is anyway in HECK for you to keep that house, fix it, and put up with some heat; Please, please do it.
I realize that it doesn't look good now, and my heart goes out to you, but it can and will get much worse: If I lived down there, I would sit down with you and paint you a picture.
Believe me, you do not want to go thru a Shortsale or a Foreclosure.
Good luck and may God bless
SUCCESSFUL SHORT SALES
Future Fannie Mae Loan - Primary Residence
A homeowner who loses a home to foreclosure is ineligible for a Fannie Mae-backed mortgage for a period of 5 years
A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae-backed mortgage after 2 years
Future Fannie Mae Loan - Non-Primary Residence
An investor who allows a property to go to foreclosure is ineligible for a Fannie Mae-backed investment mortgage for a period of 7 years
An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae-backed investment mortgage after 2 years
Score may be lowered anywhere from 250 to more than 300 points. Typically will affect a credit score for over 3 years
Late payments on mortgage will show, and after sale, mortgage is normally reported as "paid as agreed", "paid as negotiated" or "settled." This can lower the score as little as 50 points if all other payments are being made. A short sale's effect can be as brief as 12 to 18 months.
Foreclosure will remain as a public record permanently, and on a person's credit history for 10 years or more
A short sale is not reported on a credit history. There is no specific reporting item for "short "sale." The loan is typically reported "paid in full, settled."
Foreclosure is the most challenging issue against a security clearance outside a serious misdemeanor or felony conviction. If a client has a foreclosure and is a police officer, in the military, in the CIA, security or any other position that requires a security clearance, in almost all cases clearance will be revoked and position will be terminated.
On its own, a short sale does not challenge most security clearances
Employers have the right and are actively checking the credit of all employees who are in sensitive positions. In many cases, a foreclosure is reason for immediate reassignment or termination
A short sale is not reported on a credit report and is therefore not a challenge to employment
Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have (besides bankruptcy/charge off) and in most cases will challenge employment
A short sale is not reported on a credit report and is therefore not a challenge to future employment
In 100% of foreclosures (except in those non-deficiency judgment states), the bank has the right to pursue a deficiency judgment
In some successful short sales, it is possible to convince the lender to sign a release and give up their right to pursue a deficiency judgment against the homeowner
Deficiency Judgment (amount)
In a foreclosure, the home will have to go through an REO process if it does not sell at auction. In most cases this will result in a lower sales price and longer time to sale in a declining market. This will result in a higher possible deficiency judgment
In a properly managed short sale, the home is sold at a price that should be close to market value, and in almost all cases will be better than an REO sale resulting in a lower deficiency
Deficiency Judgment (statute of limitations)
In a foreclosure, the first mortgage holder has 6 months to file for a deficiency judgment (the second mortgage holder has 6 years).
If the mortgage holder does not release their right to pursue a deficiency judgment they have up to 6 years to file and seek a deficiency judgment.
Helene M Moore
Windermeree Prestige Properties
You need to contact a bankrupcy attorney advisor to see if there is a kind of bankrupcy for your situation.
Better to get a professionals help in that arena, but don't just walk away. Do it the right way.
From my experience most attorneys will give a free consultation if they can make some money from a lawsuits. To clarify though, the attorney will get paid through a non disclosure suit if there is a case to be had. They will likely ask or 1/3rd of the settlement. I'm not one for sewing everyone but there has to be more to this. I doesn't sound like the seller gave full disclosure or the agent looked out for the buyers best interest. There may be a hang up if the buyer signed the arbitration agreement on the RPA. I always remove it on my contracts. I know there are a lot of free, general advice, resources out there but I think we are only getting 10% of this story. If this was a client who walked into my office I'd have to ask a lot of questions. That's why I say call an attorney and to put an ellipsis on this (one who was referred by a family or friend.)
To sum it up based on your first highlighted question. If you allow the home to go into foreclosure and just walk away you'd be considered a flake and would have a difficult and long time reestablishing your credit and it can come back to haunt you in other ways as well i.e. employment and other business opportunities. Employers don't like flakes.
Now if you go through a short sale you will be viewed as a distressed homeowner and victim of a collapsed RE market trying to negotiate a business deal. Your credit won't be nearly as jeopardized. It's a bit of a grinding and grueling experience but it's better than just throwing in the towel and running away.
I am sad to hear about your unfortunate living conditions and the burden of the situation.
Everyones' situation is different and no one answer is right for everyone. If you haven't short sold or undergone any foreclosure proceedings feel free to give me an email at email@example.com
If you are holding a 1st and 2nd mortgage there exists a dirty secret. Depending on your situation, its usually beneficial to stop payment on the 2nd mortgage, in order for an action to take place they must assume the 1st mortgage. Is this your situation? I doubt it, but if so you may have more options available to help you keep your house.
I'm sure everyone on this site would love to hear an update about your experience.
How did it go? What was the outcome? often times we provide opinions and advice here and we never hear back. It's always nice to get closure. Can you fill us all in? Thanks!
Realtor & Certified Pre-foreclosure Specialist
Keller Williams Realty
Sorry to hear about your situation. However, there is hope. If attempting a short sale, the appraiser will adjust the value based on the unpermitted additions and not include them in the overall value of the home. For example, if your home was a 4 bedroom, 3 bath with one bedroom and one bath being unpermitted...the home will be valued based on comps of 3 bedroom, 2 bath homes in the area.
DO NOT GO INTO FORECLOSURE. After working for a few years helping homeowners in default, you find that most people do not act fast enough. A short sale will get you out from under the debt, save a little bit of your credit score, get you a little extra time in your home, and allow you to purchase another home sooner than if you let it go.
Get an agent who knows the foreclosure process to help you. You will need an agent to assist you with a short sale as most of the big lenders use an online program called Equator to facilitate the process. Make sure they have handled this situation before because if you get a rookie it could prove costly.
The main thing is to act fast. Most of the time, the borrower will wait and wait on a Loan Modification but those are very rarely granted and I've seen them be denied a week before the Trustee's Sale is scheduled. Many people hold on hope until a Notice of Trustee Sale has been filed (which states your home will go to sale in 30 days) and by then, it's tough to complete all the necessary steps for a sale.
Consider this timeline if you go into default:
Notice of Default - you have 90 days to get current
Notice of Trustee Sale - 30 days to get current on the loan or it is sold to the highest bidder
Although it can be done sooner, I like to have 60 days to market a property, receive a solid offer, and present it to the bank to at least have the sale postponed.
If you have any questions or need further assistance, feel free to email me.
I would suggest you consult with an attorney on this matter. You have a statute of limitations against the seller and the sellerâ€™s agent and the company that agent worked for, depending on when you actually discovered these issues. The buyerâ€™s agent also has fiduciary duties that he or she should have made you aware of these issues or may have had a right to protect you in this regard. These reasons are why as professionals, all parties have to disclose all aspects of the property. We,as real estate professionals, have a fiduciary responsibility to all parties in the disclosure process. There are laws protecting buyers in the purchase of 1-4 unit properties.
As far as foreclosure, you need a valid financial harsdship, unfortunately the scenario you have detailed above does not constitute a financial hardship, but my answer would be below for anyone contemplating foreclosure proceedings:
No, if you can work with the bank for a short sale depending on your state laws, you should avoid foreclosure, you have a better chance at negotiating any deficiency judgments; again this depends on local, state and federal laws. You should always discuss this with your own legal representative before you make a decision. If you reside in California and it sounds like you do and are within my area, if the bank allows a short sale there is a new SB law put into place by our Governor declining the banks from going after home owners in a deficiency judgment on a first or second lien.
My advice would be to interview at least 3 professional real estate agents or get the advice of a consultant before you make a decision. Time is of the essence when you are faced with a foreclosure.
Governor Brown has signed Senate Bill 458 (Corbett) expanding anti-deficiency protection to all 1-4 residential mortgages or deeds of trust where the beneficiary consents to a short sale, whether a first deed of trust or a junior deed of trust. As an urgency bill, it became effective on July 15 when it was chaptered into law. The new law also limits the short sale anti-deficiency protections by excluding sales where the trustor is a limited partnership or LLC. Existing short sale law enacted in 2010 already excluded corporations.
The new law expands on short sale anti-deficiency legislation passed last year. Senate Bill 931 (Ducheny) was enacted last year in response to concerns that borrowers could have greater liability after a short sale than after a foreclosure. SB 931 prohibited a lender from obtaining a deficiency judgment as to a first mortgage or deed of trust following a short sale. Since SB 931 only applied to first mortgages, homeowners with more than one mortgage could still be liable to a junior note holder after the short sale. The new law addresses that issue.
With all these problems that you have which would cause a lot of money to fix including applying to the city for legalization of the illegal construction which you may or may not get, and with her husband working 12 hours a day, it sounds like the house has been nothing but a misery for you. And without working AC, it is tough living in a house like that. Also, since you bought it in 2008 and the property is in the inland empire, I imagine it may be underwater or have gone down significantly in value, to continue paying the mortgage is too throw good money after bad.
But if you let it go to foreclosure, you need not worry about it financially anymore. But there are consequences that come with a foreclosure. Your credit rating will go down. You will need to find a place to live. And if you had refinanced with a second, the second as a sold-out junior lienholder can come after you for deficiency.
If you purchased your home in Corona in 2008, there is a good chance that it is worth less than you paid; especially if it is in "construction mode".
The only other options I can suggest are to bring in more money to sell it and pay off your loan or do a short sale. Short sales are sales where you list your property at current market value. You provide your agent with all the documentation necessary to convince the bank that you are unable to continue to make your mortgage payments because of a "hardship". This could be loss of job, salary decrease, illness, divorce, etc. Your agent will work to get the bank to accept the current offer because current circumstances make it impossible for you to make mortgage payments as agreed and a foreclosure is imminent. If this describes your situation, a short sale may be your best option.
Your situation appears to be more involved however, and it is possible that a Real Estate Attorney could help you recover the money you need to correct the situation. It is likely that it wouldn't cost you anything up front to find out because the attorney may represent you in exchange for a percentage of any proceeds they can get for you if they're successful. Please contact a Real Estate Attorney before making a decision.
Unfortunately, houses are commonly sold with unpermitted fences and patios. Many homeowners consider these "do it yourself" projects. Unpermitted bedrooms are also not unheard of, but many times bedroom additions are easier to spot because they are either constructed in the garage, or there may be uneven flooring where you enter it, or other features such as a window, stucco, etc that suggest an addition. If there were to be a fire or other situation that was to compromise the integrity of the unpermitted bedroom, insurance would not cover it. If it were brought to the attention of the authorities, they would require it to be permitted or demolished.
According to Kaplan Real Estate Schools, a reputable school for obtaining the traning for various Real Estate licenses,
"California home inspectors are not required to be licensed. The California Business & Professions Code defines a home inspection as a â€œa noninvasive, physical examination, performed for a fee in connection with a transfer, as defined in subdivision (e), of real property, of the mechanical, electrical, or plumbing systems or the structural and essential components of a residential dwelling of one to four units designed to identify material defects in those systems, structures and components.â€
The most reputable home inspectors are members of ASHI or CREIA. There are situations where they are liable for defictive inspections and most have E & O insurance. Ask a Real Estate attorney.
Title companies are there to ensure that when escrow closes, you actually own the property and no one else has a claim to it. Title insurance insures against someone coming up with a deed or claim and trying to take your house.
When your home was appraised, the appraiser measured it and may have noted a discrepancy between square footage on public record and actual square footage. If there is an unpermitted bedroom, the home would usually measure larger than that stated on public records. Public records are often inaccurate, especially in new construction. In older construction, there are sometimes signs that something is an addition...uneven flooring, sloping ceiling, window, stucco, etc. The lender orders the appraisal to be done to verify that the property is worth the price they are loaning on.
Each state has it's own Real Estate laws and proceedures. I think it would be worth it for you to contact a Real Estate attorney to explore your options before doing anything.
If your husband is working that hard, maybe consider leveraging the cash flow to better use that money.
LIfe and owning a house is a struggle...no renovation EVER happens in 20 minutes like on TV...ever, anywhere on the globe. Once you understand that, stop beating yourself up, step back, take a deep breath and only focus on the basics..no patio, no fence..just four walls nice and clean.
A little more pain now is better than ruining the next 7 yrs of your life.
Your siutatoin is not unusual, but reach out to an expert and get some good advice;
Your story is unfortunate, but not rare. Depending on your state, it may be too late to pursue a tort claim, but there may be some breach of contract or warranty issues that you may be able to pursue legally because in most states the statute of limitations on contracts is longer than that for torts. Basically, reach out to an attorney in your area for legal advice on how your may be able to remedy the situation. Try to avoid foreclosure if you can ban exploring the various options discussed by the other commentators here such as short sale. You may be able to save your credit and recoup your financial investments, but it will take some more action and work on your part. Unfortunately, fixing the situation will take time, but your proactive action so far will pay off.
Letting your home go into foreclosure and being foreclosed on are two different things. What am I getting at? Foreclosure is a process that takes months during that time you could sell the house in its current condition to someone who would be able to finish the unfinished work and own the home or sell it. Here is the best part, you can sell the house for LESS than you owe to the bank, it is true. Your situation sounds perfect for a short sale and short sales are a very easy simple process. You can live in your house the whole time during this process, you can continue making mortgage payments or it if is too difficult you can stop as this would be what triggers the foreclosure process to start. NOW, it takes 3 months before your lender can begin to foreclose on you. From that point to the actual foreclosure "Sale" is months down the road, giving you and your agent plenty of time to complete a short sale! CNN said it best, "Don't foreclose, DO a SHORT SALE!" :)
Here is my blog on short sales,
you can get through this!!
Your unfortunate dilemna is a testimony to others who may think I can do a rehab job. As I hear in your words it is more than a job. It is a nighmare. Finding reliable tradesmen, permits, escrows, liens, city compliances, etc. Before you waive the flag of surrender go to your local city or county building to see if there is help in the form of grants to help you fix and save your home. If you and your family really feel your home is a black hole just sucking up money prepare to make your exit. You can let your lender know that you can no longer afford your home and it needs numerous repairs. They may give you some assistance or direction into how to resolve this issue. I would also recommend talking to an attorney who may suggest bankruptcy or negotiate with your lender on you deeding your home back to the bank in lieu of foreclosure, short sale or straight sale. Also, if you feel that you purchased your home with the previous seller not disclosing items you state are not permitted you may have a recourse with this, so please mention this to the attorney.Your realtor may also be a good source to help you so reach out to this person. Rachel, no matter how this ends a dream home, that is turned into a house horror can take a toll on your mental health and physical health so make a exit list and work towards it now.
Paulette Teel, SRES
Pearson Real Estate
San Antonio, Texas
Additionally, I don't know of too many attorney's nowadays that will take small RE cases on a contingency basis. It's been my experience that these types of cases are mostly fee for service. Now if it's a large liability action where there's lot's of deep pockets in the mix that's another story.