Yes, I received a call from a potential client who asked me this very question. Now, he didn’t ask in those exact words, but that’s what he asked. After months of trying for a loan modification without any assistance, he’s mad. After 3 months of a loan mod trial he was ultimately denied for, he’s very mad. After losing his job due to illness, and losing everything he’s worked so hard for, he’s REALLY REALLY mad.
I don’t blame him. Unfortunately, overall, this is not a “happy” market. At least not for most sellers. Many have come to the realization that it “is what it is,” and succumb to the system, the guidelines and the process. MOST short sales close, go smoothly and work out just fine (though the reasons for this I’ll discuss in another post).
This gentleman however, is angry, so angry at the bank for not helping, at his situation. He’s now so far behind in payments he’ll never catch up enough to stay out of foreclosure at this point and with a foreclosure date looming in a couple of weeks, he desperate to avoid it. However, he also acknowledges, he has nowhere to go, no money, no savings and doesn’t even know how he’ll move. What are his options? This is what he asked:
1. IF I do a short sale, can I sell everything I put into the house? High end range/oven, lighting, built in refrigerator system, dishwasher, tile flooring, custom sinks and fixtures in bathrooms, built in shelving and more.
Stripping these things from your home will make it very difficult to sell to a buyer. Most first time buyers (and this home is in a first time buyer neighborhood) will require the basics; stove, complete bathrooms, plumbing, capped off electrical. There’s nothing wrong in my estimation of selling your personal property i.e. a stand alone range, things not attached to the structure. But when you start removing items physically attached as fixtures, you start to get into a grey area. If you remove a sink, are you going to leave plumbing hanging? Or will you replace it at least with ‘builder quality’ fixtures? We know many banks inherit REO properties that have been absolutely stripped, but even then, in many cases, the banks will at least the basics to get the property to FHA finance standards. It lowers the value, it increases the cost to the bank. Perhaps, just perhaps, banks would have an action against a borrower who strips the property of attached fixtures. Not sure, but it’s not a property I’d want to sell as a short sale.
Remember, as the seller of a short sale, you are still “on the hook” for proper disclosure. Will you disclose you stripped all these things?
Is it the right thing to do? (usually my bottom line question for people) And remember, I’m not talking about taking your refrigerator or washer/dryer – that’s fine. I’m talking about ATTACHED fixtures, or built in appliances.
2. Can I do HAFA because they’ll give me $3,000 as a relocation incentive, right?
Well, yes, but upon further investigation, B of A will decline this particular file as it is too close to it’s foreclosure date. Very important NOT to wait until foreclosure is knocking at your door.
3. What about B of A’s cooperative short sale? They’ll give me $2,500 as a relocation incentive, right?
Right, except if you have a 2nd lien, they will not accept you into the program. Bank of America also outsources these files, so while it sounds good “on paper” it is taking my clients up to a month to even be called back on this program.
4. What if I just stay and let it foreclose? Will I be paid to leave the property?
Each bank has it’s own guidelines for working with homeowners remaining in their homes following foreclosure. You “may” be offered “cash for keys” to leave, and to leave with the home intact. Often you will not be paid until the home is inspected and deemed to be in good condition – so stripping the property may disqualify you from these monies, or drastically reduce the amount you’re offered. A bank “can” initiate eviction too, they don’t have to offer you any money to leave, so be careful and don’t just assume money will rain from the sky.
5. Will the foreclosure be worse on my credit report?
Well, credit experts tell me, yes, of course, foreclosure is worse on our credit files. It also may take longer to buy a home again, or any big purchase. However, one thing to remember is that your rolling late payments devastate your credit score. So whether you short sale, or foreclose – after a year or more of making no payments, your credit is already destroyed. It’s a matter then of how quickly you can recover. Best to speak with a bonafide non profit credit counselor to help you rebuild and get back on track.
6. Maybe I should just do bankruptcy.
For some, this is a solution. It is a solution an attorney can advise about. But if you owe lots of money on other personal debt, consumer loans, credit cards, etc… perhaps selling a home you haven’t paid for in over a year is the least of your worries. All the rest will still be there when the house is gone. But from what attorneys have told me, it is best to talk to an attorney BEFORE YOU SELL YOUR HOME or lose it in foreclosure. The reason for this is that with your mortgage(s), you have a MUCH bigger debt load. Seek the advice of an attorney anytime you are contemplating the decision between short sale, foreclosure or bankruptcy. This is a LEGAL question and strategy – not a REAL ESTATE question. Be certain you are not getting these answers from your real estate agent.
So those are just some of my random thoughts for the day. I’m not an attorney, but I AM a real estate broker serving sellers and buyers in the Walnut Creek area of the San Francisco Bay Area. I’ve become very experienced at helping sellers in short sales and might be able to help you too. I can help refer you to an attorney and CPA which are vital in these important legal and financial decisions.
Remember, I’m not associated with the government or your bank.
Windermere Bay Area Properties
Contra Costa real estate. Walnut Creek, Clayton, Concord, Pleasant Hill, Martinez areas are my specialties but serve the entire 680/24 corridor including Lafayette, Orinda, Moraga, San Ramon, Alamo, Danville, Diablo. I also do go east to Oakley, Brentwood, Discovery Bay, Antioch, Pittsburg and Bay Point.
You won’t find a local agent any more versed on short sales and the workings of all the major banks.