Q: My parents signed the title of their home over to me some years ago, with a small mortgage. The place is in a high-crime area, and has depreciated significantly over the last few years. No one in our family wanted to live there, and I didn’t want to deal with tenants, even though my Realtor told me that with Section 8 tenants, I would have $700 in positive cash flow every month. (There is rent control in my area, and tenants can be a real hassle.)
Anyhow, I put the place on the market several times over the last few years, but it never sold. Finally, I stopped making the payments and decided to walk away from it. At the same time, though, I let my Realtor put it back on the market on the off chance (it would sell).
She got a full-price offer at a price that would pay the mortgage off in full, plus some, even after commissions! By the time we got the offer, though, a trustee sale had already been scheduled. My Realtor faxed the offer multiple times to the bank, but they claimed they didn’t get it and they just went ahead and foreclosed on it. What should I have done differently here?
A: There’s a long answer, and there’s a short answer. I think you’re looking to see how you could have handled the offer process differently, or how you might have been able to get the bank to stop the foreclosure process pending your sale of the home. That’s the short answer, and we’ll go there momentarily.
But first things first: There were lots of places you might have made different decisions in order to end up in a different place. I’ll avoid preaching, because I’ve seen how these sequences of events can unfold, and I know the pressure, stress and conflicting information that can be involved. But you could certainly have rented the place out. I’m not a big fan of unwilling folks bringing tenants into their lives — especially in rent- or eviction-controlled jurisdictions and situations (like Section 8). However, it does seems that the cumulative financial upside of (a) keeping the property, (b) preserving the credit of whomever holds the mortgage on the property (one of your parents?) and c) getting the rental income might have been worth the potential for hassle.
What I hear you saying, though, is that you really didn’t want to keep the property. It sounds like the neighborhood and housing values had deteriorated sufficiently to render the property more of a burden than a blessing to you. Did you consider giving it back to your parents? They might have been more willing to put the effort into renting it for passive income or aggressively marketing it for sale before the foreclosure process was even initiated.
But alas, that was not to be. So, assuming all else went as it did — when you got the final, full-price offer, was there anything you could have done differently to end up with a positive net sale, rather than losing the place to foreclosure? It sounds like you needed to personally be on the phone for as long as it took to get your offer in the hands of someone with the authority to stop the sale. …CONTINUED
What most homeowners fail to realize is that a sea change has taken place in the last few months in the world of mortgage banking. Most banks will absolutely postpone a scheduled trustee sale when they have in their hands some hard evidence that a preferred mode of resolving the delinquent mortgage — be it through loan modification, short sale or even a deed-in-lieu of foreclosure — is likely to happen in the near future. I see it happen a couple of times a week.
So, when you received that offer, which would have paid off the lender and netted you some cash to boot, in addition to having your Realtor send the offer to the bank, you should have hopped on the phone with the lender and not hung up until you had the name and phone extension of someone — ideally a loss mitigator or home retention specialist — to whom you could have faxed the offer, and then followed up with. Your job was to not relent, not stop calling, until that person, or someone, acknowledged that your offer had been received and the trustee sale postponed pending close of escrow.
Alternatively, you could have hired a foreclosure defense attorney to make a few calls and stop the foreclosure. Realtors can call, but they are on the go and often not around to sit on the phone for hours on end waiting to verify the bank’s receipt of a document — especially if the transaction was not a short sale and your Realtor was not staffed to handle the never-ending story that phone calls with the bank can be.
There are a number of lawsuits now pending in which homeowners claim they lost their homes when lenders intentionally ignored faxes or calls — these cases tend not to be particularly fruitful, especially when weighed against the years of drama and legal fees they eat up to get to an adjudication. I mention them only because there is really no excuse for the bank foreclosing a home that was in contract to be sold at a price that would pay the loan off.
No matter what the bank did wrong in this situation, when it comes to what you could have done differently, exercising a higher degree of control and personal responsibility over the fate of the property is the theme. The next time you are faced with any sort of personal finance or debt debacle, don’t give up — take control and be proactive in communicating with your debtors, to make sure you come out of it as well as possible.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.
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