Often, sellers think that sending house keys to bank will satisfy their obligation. It will not. When the borrower closed their loan they signed two documents; first, "A Note" which is a promise to pay and second "The Mortgage" offering the home as collateral.
These are two different documents; the loan is a promise to pay the FULL AMOUNT owed or amounts if you have multiple notes/loans. The MORTGAGE, allows the bank to seize the asset, BUT it does not allow forgiveness if the asset is worth less then the note. The bank can and most likely will at some date try to collect the difference. They can hire collection companies, attorneys and even garnish wages. The bank can also 1099 you for the charge off and put a foreclosure on your credit record.
So to walk away is just a short term solution to a much larger problem, a band-aid for a bullet wound. Before your client puts those keys in an envelope, have them seek legal advice and review the many other options like Short Sales, Loan Modification, Repayment Plans and/or Deed in Lieu.
Need more information, call me !
Mike Sher,
Office: (248) 644-4700x242 Fax :(248) 499-1020 Bloomfield Hills, MI 48302 E-mail: mike@mikerealtor.com
CDPE (Certified Distress Property Expert)
CDPE (Certified Distress Property Expert)
MCAR, Short Sale Trainer
Max Brook and Real Estate One Short Sale Specialist.
The Mike Realtor Team Blog - Metro Detroit/Oakland County
Servicing in Southeast Oakland County, Auburn Hills, Birmingham, Bloomfield, Berkley, Beverly Hills, Canton, Clawson, Farmington Hills, Ferndale, Huntington Woods, Northville, Novi, Pleasant Ridge, Plymouth, Royal Oak, Rochester Hills, West Bloomfield, Troy, etc. We worked with: Bank of America, Country Wide, HSBC, EverHome, Litton, GMAC, Chase, Wells Fargo, Flagstar, Fifth Third, Charter One, Comerica, Am Trust, US Bank, National City
But, We Can Help!
This is a competitive real estate market. If you have to sell and can not, perhaps it is time to look at a Short Sale. The Mike Realtor Team has performed dozens of Short Sales for professionals who have lost their job, income has declined, medical problems, relocation, retirement, divorce, loss of spouse, unable to make ends meet, or other reasons not listed.
Very true! Hiding and giving up NEVER works.
Unfortunately the banks don't often give the owners a choice. If they don't respond to short sale offers and a loan modification won't help then what does an owner do? It is a Catch-22 that doesn't seem to be getting any better with any of the "bailouts" currently offered.
Great advice regarding advice for your clients. They should absolutely contact an attorney to discuss their options and legal ramifications of this decision.
Right to the point. . .unless the bank puts in writing that there will not be a deficiency judgments later . .you should never give them the keys!
We had a SS seller...with a great offer...over asking...who then decided to "add" every debt on earth...credit cards,,..etc. to the tune of another 6 figures...short sales are a wonderful thing...but they are not a free pass to start over...furnish your new digs...get a new wardrobe.....bla, bla, bla....
The task is in educating the seller, not to believe that it is better to walk away.
David,
You are so right. A short sale is not a golden parachute. It should only be used when you have real hardship and you have sell. Their will be consequences but the consequences are far less then a foreclosure.
Mike
Cindy,
The best we can do is try, try and try. Sadly some negotiators are more interested to making a name for themselves as a hard A*S who gets borrowers to pay or else compared to the good negotiators that save homes and home owners from foreclosure.
Mike
Hi Mike, Good post. Thanks for sharing.
Best - Sash
Hi Mike, I've been enjoying your posts on short sales, thanks for sharing. ~jen