#1 Florida is a state where the bank can come after you many years later. Florida is a "recourse state". In other words, the lender may still pursue you EVEN AFTER taking your property back through as a result of a foreclosure.
In Florida, lenders have FIVE YEARS to go to court AFTER the foreclosure. They then have another 20 years to let their attorneys pursue the borrower for collection of judgments, to levy bank accounts, garnish wages if possible, and put liens on other properties, (including cars). Very few people planning on walking away from their mortgage today have any idea they could try to sell something 20+ years later only to have a deficiency judgment surface when it is time to close the sale.
#2 What happens when the bank changes its mind and decides NOT to foreclose AFTER you have moved out and abandoned the property?
Please read this article by Michelle Conlin titled, "Special Report: The lateset foreclosure horror: the zombie title" A link to the full story is here:
In brief the article covers several owners who abandoned their properties after being served a foreclosure notice. In each case, the bank decided NOT to foreclose. The owners went on with their lives thinking they no longer owned the properties only to have HUGE problems surface later as a result.
Joseph Keller is a 58 year old who abandoned his house after receiving notification that Chase was going to foreclose. The bank changed its mind and decided not to complete the foreclosure. A year later he was sued by the County because of local housing code violations, then the tax collecter started sending him notices.
He even had his application for SOCIAL SECURITY DISABLITY BENEFITS REJECTED! Why? Because he still owned this (upside down) "asset". We are talking about someone with hepatitis C who needs a liver transplant to stay alive. Without disability coverage, he can't get the transplant and will not survive.
There are other people in the article whose stories are just as jaw dropping: A 55 year old grandfather with cancer who is now on probation and may go to jail over an investment property that he abandoned after HIS BANK also decided NOT to foreclose! Richard Chavarry who had is income tax refund siezed by the city.
So, What exactly is a short sale in real estate? A short sale occurs when the seller owes more on the property than it is worth, does not have the means to pay the difference, and the bank agrees to accept LESS than a full payoff for the amount owed.
Banks PREFER short sales over loan mods and foreclosures. Why? It's strictly business. They lose significantly LESS money on short sales than they lose on foreclosures. The amount owed has nothing to do with whether or not you are approved. What is important? The bank wants to see some type of financial hardship in addition to the fact that the property is worth less than the mortgage. These are the two qualifications banks are looking for. The fact that the property is worth less than what is owed does not automatically qualify the owner for a short sale by itself.
GET PAID! Sellers who still occupy the property normally get a "moving allowance" from the sale. In most cases this is about $3,000. Also, some lenders have been offering additional financial short sale incentives for holders of certain types of mortgages from banks like Chase and Bank of America. For example: Chase offered $30,000 at one point to borrowers with certain bad 80/20 type loans they purchased from Washington Mutual. If you get an offer like this FROM YOUR BANK, do not through it away. These offers are LEGITIMATE if they are coming from the lender to you, requesting you to find a Realtor and list the property as a short sale. We processed short sale for two owners who got the $30,000 allowance after vacating the house and listing it with us as a short sale at a later date!
With a foreclosure? You get ZERO DOLLARS from a foreclosure sale, and a public notice to move in a hurry because the public sale date has arrived and your number is up. Even worse, you are GAMBLING with your financial future, hoping that the no one will ever come after you YEARS LATER for the money that the bank lost.
DO YOU QUALIFY? Some financial hardship examples include: loss of job, business failure, damage to the property, death of a spouse, death of family members, severe illness, inheritance (when the property is inherited with a mortgage the heirs cannot pay), divorce, mandatory job relocation, medical bills, military service, payment increase, insurance or tax increase, reduced income, separation, too much debt, or incarceration.
Our services are FREE to you! Sellers do not have to pay the Realtor's commission or closing costs in a short sale.These funds come from the sale of the property, and this is made possible by the fact that the lender is taking less than what is owed.
Weigh the cost of renting a moving truck against the repayment of the mortgage balance (often 100's of thousands of dollars) and it is easy to see why many sellers have chosen short sales. Being allowed to walk away from a mortgage that is larger than the value of the property is still a great opportunity for most sellers to start over and re build their future, rather than just ignoring a problem that will only get worse with time.
It is important to remember that each seller's situation is unique, and in the same way, one short sale can be very different from another in terms of difficulty and the end result. One seller may be unemployed with one mortgage on a house. Another might have gotten a raise, but have two mortgages, a home equity line, and a homeowner's association lien from not paying maintenance on a condo. The fewer parties that have liens on the property, the easier it is to have a short sale approved.
Why not just "Walk Away" and let the lender foreclose? 6 more Reasons!
#1 YOU are not the only one getting hurt by a foreclosure. You are also hurting Your Neighbors! Is that something you REALLY want to do?
Properties sold via short sell bring HIGHER PRICES than properties sold via foreclosure or at a foreclosure auction. Foreclosures bring EVERYONE's properties down INCLUDING YOUR NEIGHBOR'S, and they are bad for the economy. Do you really want to do hurt your neighbors when you could have avoided a foreclosure with our help?
#2 There is a special kind of pain that comes from "living in limbo", and never knowing when your number is going to come up for the auction on the court house steps. You don't know whether to hang the curtains or pack moving boxes. Why not TAKE CONTROL of the process and have an orderly, planned moving date?
#3 You could INVEST in Your Future - Sellers who were pro-active and did short sales just a few years ago are now BUYING HOMES at market-corrected prices with record low interest rates. They decided to work with their lender, and are now INVESTING in a home that will be PAID FOR in their future.
FHA is now approving new mortgages IMMEDIATELY after a short sale to borrowers who have not been late on their payments during the last 12 months!
# 4 EVERY normal loan application has this question, "Have you ever lost a home to foreclosure?" Once you have a foreclosure you will need to check "YES" for the rest of your life. So choosing foreclosure could mean choosing a Higher interest rate on every financed purchase you make for the rest of your life! What could that add up to?
# 5 Sellers benefit from a short sale by reducing the hit on their credit, avoiding foreclosure, and avoiding the severe consequences of a foreclosure. Foreclosure consequences that could be avoided or greatly reduced by a short sale include:
the loss of security clearance
having "foreclosure" stamped on your credit report for 10 years
an average loss of 300 points on credit scores
higher interest rates on future purchases
HIGHEST POSSIBLE AMOUNT on DEFICIENCY JUDGMENTS from foreclosures -The lender's recourse doesn't end with the foreclosure sale on the court house steps, and the transfer of property ownership to the lender. The lender may choose to file a deficiency judgment against the borrower equal to ALL of the funds it lost as a result of the foreclosure.
no approval on Fannie Mae-backed mortgages for five years
challenge to current and future employment for sensitive positions
Each of the above items could be substantially reduced or possibly avoided altogether through a lender-approved short sale.
# 6Move with a SOLD sign in the front yard instead of an eviction notice taped to the window!
If you have any concerns regarding real estate or the process of going through a short sale in Fort Lauderdale, Florida you can contact me here or e-mail me.
Charles Rutenberg Realty LLC 2201 West Prospect Rd STE 200 Fort Lauderdale, FL 33309