Foreclosure University Blog

Question: If I declare bankruptcy now with regard to my other debts, will it prevent the short sale from going through?

Answer: -No.  Bankruptcy only postpones an auction or short sale which buys you more time.  In fact, many short sale investors will use bankruptcy as an option if they need to buy more time so it doesn’t go to auction, as long as it’s in the best interest of the homeowner.

Jarad here and there is some BIG NEWS today.

FHA announced that they have suspended their 90 day rule beginning 2/1/10. This is beyond huge for investors because we can now sell properties to FHA buyers without having to season the title for 90 days.

There is a HUGE inventory of FHA buyers, in fact most first time home buyers use FHA because of the simpler lending requirements and lower down payments. And since a lot of deals we are seeing are entry level homes it makes for a perfect fit.

See it was difficult there for a little while because FHA refused to finance a deal if the seller was not on title for at least 90 days or longer which prevented a ton of first time home buyers from getting into these entry level homes at affordable prices.

Now finally after 4 years they decided to lift that requirement, with a few minor exceptions like…

All transactions must be arms-length, with no identity of interest between the buyer and seller…

And the seller has to be on title at the time of close… etc. you can read about the waiver on HUD’s website.

This means anything is fair game now, Short Sales, REO’s, you name it!

So go out and start flipping those deals, you have no excuse now.

Question: I built a home in New York two and a half years ago for my daughter to live in. The mortgage and title is in my name only for a current balance of $147,000.00. My wife and I live in South Carolina. Our condo here is on the edge. We could probably sell it for what is owed. We also have a boat that probably has $30,000.00 in equity. Add in a Money Market Account with $35,000.00 and $60,000.00 in what were 401K’s but are now rolled into simple IRA’s. Credit card debt is about $10,000.00 Cars are bought and paid for. My daughter has not been able to make the mortgage payments for the last eight months. I have been making them, along with all of my own payments. It has come to the point where I am going to have to let the bank have the house back. I have about $50,000.00 wrapped up in the house, but when the bottom dropped out in rural upstate NY, it really dropped out, and I could not sell the house at this time.  If I let the house go into foreclosure, can they touch any of my other assets. My wife is co-signitor on the condo and boat, but again, not on the NY house. I have excellent credit, but I’m at the age where I seriously doubt that I will be making any major purchases any time soon.

Answer: -Can they come after your assets? No.  Because when you signed the paperwork, the bank agreed to loan you the money and used the house as collateral.  However, if you ultimately go through foreclosure, the bank has the right to file a judgment against you for the amount they lost.  So you are expected to pay the difference or in most cases people will file bankruptcy to eliminate the judgment.  By doing so would require you to sell some or all your assets.  So the best option is to work out a pay off or settlement with the bank for a fraction of what you owe on the loan.  This is called a short sale.  By having the bank approve a short sale and asking them to satisfy the loan, they give up their right to file a judgment.  You’ll also able to avoid foreclosure and possible bankruptcy.  Again the key here is to get them to “satisfy the loan”.  By doing a short sale, you’re also giving the buyer a good deal on a home that is upside down.  Now if you are successful in getting a short sale approved, more than likely they will just 1099 you for the difference.  But that’s a lot better than a judgment.  And there is a chance they won’t 1099 you either.

Question: What should i do?

Answer: -Well, you can try to settle the debt with them and pay them a fraction (5% -10%) of the original loan amount, you can do nothing and hope they issue you a 1099 in which you will have to pay taxes on that money you received, or they will file a deficiency judgment against you in which they can garnish wages and so forth until that amount is paid.  If it goes that far, most people will file bankruptcy and either get it wiped out completely with a Chapter 7 or agree to pay the lender a certain amount (5% – 10%) over a period of time with a Chapter 13.

Question: Does the fact that my mortgage is 55% of my income help me prove financial hardship?  Can I short sell my condo to my fiance before we get married?  Should I consult a real estate attorney or an agent for help?  Any help on this would be greatly appreciated. Thank you!

Answer: -55% is a lot, but may not prove financial hardship, unless you’ve had a loss in income or increase in bills or something like that.  You can short sell you home to anyone you want as long as they are not related, but you also risk not getting the short sale approved in which then your home will go to auction and then the 2nd may file a judgment against you for the amount they lost.  But if that’s your best option then, yes a short sale is a great route to go.  I would definitely seek help from an agent if you need to find some buyers…or investors in your area would probably love to do a short sale on them.

Question: Who is liable for paying unpaid property taxes when I buy a foreclosed home from the bank?

Answer: -Typically property taxes are senior to any lien on the home including the mortgage…meaning they have priority over everything.  So if you are buying a property at the auction, it’s important to research the property and get a title report so you know if there are any unpaid property taxes because you or the winning bidder will be responsible to pay those off.  Now if you buy or purchase a property that is REO or in other words “bank owned” then they will pay any of those unpaid property taxes so they can sell the property with a clear title.  Hope that helps.

Question: We have heard recently from IRS that we may not qualify for the 1st time Home Buyer’s Tax Credit because of our past ownership. We foreclosed on our home due to business failure in January 2006. Home went to courthouse auction May 2006. New Home was purchased and closed on Aug 25th 2009.

At what point of our Michigan foreclosure process would one be no longer legally be considered a home owner of that foreclosed property? Assuming it would be as of the auction date May 2006 then it would be over 3 years from purchase date of new home. Or is the redemption period included as ownership?
The Question is: Do we legally Qualify for 1st time Home Buyers Tax Credit?
Deborah

Answer: -Yes from what you’ve described, it sounds like you would qualify for the 1st time Home Buyers Tax Credit based on the 3 years of non-homeownership that qualifies a person to receive the tax credit.  However, the IRS must be taking into account the redemption period time, which I believe in Michigan is anywhere from 6 months to 1 year depending on the property, after which time you would technically not own the property anymore.  There are other “things” that would disqualify you from receiving the 1st time Home Buyer Tax Credit, but if the IRS specifically told you it was because of past ownership, then I can’t think of anything else that would cause your ownership of a home to be less than the 3 years stated.  Maybe someone else can shed more light on this…or you can google IRS First-Time Homebuyer Credit Questions…it has a ton of answers there.  Good Luck.

Question: my x husband and I bought a home through USDARuralDevelopement program. We have our property taxes deferred because we are over 62. My question is one of us cannot afford the payment. We were told by a RE Agent that we can be “forgiven” one time on all we owe? Is this true? and as far as the property taxes can our Social Security be garnished?

Answer: -  Yes, there is such a program called Senior Citizens Tax Deferral Program and like everything else you must meet certain criteria in order to qualify, like Age, Income and how long you’ve Owned the home.  And as far as I understand it does not eliminate your property taxes, it only lowers the amount you have to pay in property taxes and “defers” the rest.  Each state may have different qualifications so you may want to contact the Property Tax Division in your state to get more info on it.

Question: I have a home in Florida with sever construction defects.
The house cannot be sold and does not have any real value (actually a negative value).
We have received a rather insufficient insurance settlement from the contractors’ policy.
Since the settlement was not enough to cover the existing mortgage and provide provide a new place to live we are planning to use that money to set up a new primary residence in Arizona Can we then offer a Deed in Lieu Foreclosure? Can they take our Arizona home.
PS: There is no record with the county or is there anything from the insurance company defining how we use the money.

Answer: -First lets address the whole insurance thing.  As with any insurance policy or insurance claim, it’s there to be used to fix or rebuild whatever was insured.  So that’ s up to you how you want to handle that.  In terms of offering your lender a deed in lieu of foreclosure is definitely a possibility as long as there are no other liens or mortgages on the property.  As for your Arizona home, if you didn’t pledge it as collaterial for the Florida home, then no…they can’t take it.  The worst they can do is sue you and file a judgment against you for the amount they lost.  Very rarely happens, but it can happen.

Question: How long after foreclosure do I have until I have to be out of my house?

Answer: -Well it depends on your states laws as to how much time you have until you have to vacate your home.  If you live in a trust deed state where the redemption period is before the auction, then you’ll have a few weeks to a month to leave your home.  If you live in a state where foreclosure is filed judicially, typically the redemption period is after the auction so again depending on your states laws and redemption period after foreclosure, it could be a few months up to six months.

The best way to find out how long after foreclosure until you have to be out of your home is to call up a title company and ask them or you can visit your State Laws page and see when you redemption period is.