Modification? Deed in Lieu? Short Sale? Re-Occupy or Rent Out?
Growing numbers of our clients have experienced the slings and arrows of outrageous foreclosure practices! Just when it looks like closure is at hand, the lender deliberately or unintentionally delays recording the Trustee’s (foreclosure) deed and thus begins the haunting by “Zombie Titles”. Please see previous blog entries as to all the bad things that can happen to homeowners who move out too quickly. Never ASSUME that the foreclosure deed will be promptly recorded cutting off liability for taxes, maintenance, condo or homeowners’ association fees.
If you are receiving ongoing tax bills, lawsuit notices from your HOA, or other evidence that perhaps real estate title to your home is still in your name, it is an easy thing to check title at the Clerk of the Circuit Court’s record room and find out for certain. Our firm can help you determine who is on title to the home you may have abandoned believing you had no choice. Many jurisdictions in Virginia have the ability to check recent title changes online.
DS News, in an Article entitled: “Fighting the Foreclosure Crisis that Never Ends” recommends three or four additional options you may want to consider if you are the unfortunate victim of one of these Zombie Titles: If you make the calls or do the research to find out that title to your foreclosed home is still in your name, “contact the bank and try to find out what their plans are. The good news is that most banks are far more open nowadays to negotiate a short sale, deed in lieu of foreclosure, or agree to a loan modification than they were when most of these foreclosure cases were started.”
1. Short Sale – we’ve even had situations where a bank already had their trustee conduct a sale, realized that the ownership of the property would cause them to lose too much money, and agreed to allow the homeowner to continue marketing the house. Previous listing agents should be especially interested in this option! An attentive and conscientious homeowner (or agent) that is willing to do some upkeep and make sure the property does not appear abandoned can save the foreclosing lender thousands of dollars not only in HOA dues, maintenance, winterization, and security, but especially in commanding a higher market price. The scorned homeowner who moved out early may still want to avoid the finalization of the foreclosure and the ultimate nail in the coffin of his credit report by assisting the lender in this way.
2. Deed in Lieu of Foreclosure – some Zombie Titles are caused by title defects as much as by defective property or expensive costs of ownership. It may make sense to offer the lender the savings of avoiding advertising costs and other foreclosure expenses in conjunction with helping to maintain the property and helping to clear up title defects. In addition to avoiding the black mark of foreclosure on the credit report, the lender may be willing to grant ongoing possession free of rent. But keep in mind two areas of thin ice: (a) Some real estate investors and settlement agents in Virginia have recommended that Home Owners use “involuntary deeds in lieu” or other deeds titling their homes into the names of their lenders or other “grantees” without the permission of the grantee. The homeowner may get a false sense of closure and finality using this strategy and instead of security end up defending (incurring legal expenses and paying additional damages to the lender) lawsuits by the lender to undo the involuntary deed in lieu. There is nothing preventing the lender from adding the costs incurred to the deficiency judgment amount that the lender has the right to pursue against the homeowner after the foreclosure sale. (b) even if the lender or other grantee does not object to having a deed in lieu title transferred into their names, the condo or homeowners associations are not bound by these conveyances in all cases and may continue to collect dues from the last AUTHORIZED owner of the property. Deeds in Lieu cannot circumvent Association Rules, Rights and Powers.
3. Short Sale. Because Zombie Titles and other complications can make it difficult to hear “when the Fat Lady sings” in the Opera of Foreclosure, it helps if either you or your short sale advocate or negotiator has a good relationship with your lender or your lender’s Trustee. Most realtors who “dabble” in short sales will not handle the volume or practice law as colleagues to the trustees employed by the banks to develop these types of relationships. Many a listing agent or worn out homeowner have given up on completing a challenging short sale closing thinking that they have no time left before the finality of foreclosure. But sometimes, like commandos carrying out a coordinated raid, you just need to make sure your watch is syncronized with the lender’s timetable. Sometimes, the very reason a short sale buyer’s closing is delayed (old judgments to release, switched priorities on mortgage liens, encroachments revealed by surveys, etc.) are the reasons that will “put the lender over the top” to give more time to complete the short sale even contrary to their own guidelines. The savings to the lender in allowing the homeowner to pay for or complete the “leg-work” for fixing title issues and other problems will be far, far less than the cost of the lender’s specialized legal counsel accomplishing the same things — months or years later! — usually only after resorting to lawsuits. (Good luck getting the cooperation of any of the parties involved when you have saddled their credit report with a foreclosure!)
4. Moving Back in or Renting the Property to fully informed third parties. If the homeowner still has title in their name, has not signed on another lease, and has not accepted a “cash for keys” or other similar deal to move out, there is no reason they cannot move in and take advantage of the financial savings of rent free living until the lender makes a decision whether to finish the foreclosure or perhaps reconsider giving the homeowner a modification. In Northern Virginia, we had one homeowner who had already moved out to avoid the cloud of eviction hanging over his family during the Christmas season. Then a title flaw prevented finalizing the foreclosure and it became clear that the property might be vacant for a substantial period of time. This creative homeowner became the hero of a local college fraternity by allowing them to occupy, maintain, and entertain in the large elegant home near the DC college campus. Arranging homeowners insurance coverage required a little extra work but those costs were passed on to the grateful occupants.
The bottom line is that there are strategies of self-defense which may fit your situation if your lender has stalled in the middle of the foreclosure process. You owe it to yourself to get legal protection or at least consult with a knowledgeable short sale attorney in your state!