declare bankruptcy
Well, it happened again: another attempt at doing a good deed
getting punished. It does get frustrating at times, having to educate
those who should be in the know, but I've learned to let it go. What
else can be done but calm explanation and the hope that the information
will take root? Who knows?
You see, I am real estate agent
specializing in short sales. I've been doing this since 2007, and I
have helped well over a hundred families avoid foreclosure and secure
the release of any mortgage deficiency. It's what I do.
One of the primary benefits to a short sale is that it can provide enough financial relief to a struggling family so that they can forgo having to seek bankruptcy protection. But that's not always the case. Sometimes, a person's financial burden is such that bankruptcy is inevitable.
And so the question is, "Does it benefit someone in bankruptcy to short sell their underwater home?"
That was the very conversation today I had with yet another bankruptcy attorney. I was told, in uncertain terms, that the only benefit from a homeowner who has filed for bankruptcy to short sell their home is to "pad the pockets of the Realtor". (i.e. me).
Well, I politely disagreed. And then I took a breath and explained why:
Reason #1: The Public Reporting of Personal Information
Certain events in a person's life are recorded and some of it publicly recorded. When a background check is performed, information such as a person's date of birth, aliases or maiden names, information about property ownership and financial information including bankruptcies filed, judgments recorded and foreclosures against real property is made publicly available. This information is used for a variety of purposes: a property management company checking to see the risk of approving an applicant; an employer making sure an employee has reported accurate information; even parents are doing background checks on potential nannies and babysitters who would have contact with their family.
It is not the end of the world to have a foreclosure reported as a matter of public record, but I have had at least one client who worked for a tech company who was told by HR that it would be permissible to short sell his home due to financial difficulty but to let it go to foreclosure could cost him his security clearance and potentially his job.
Reason #2: Financial Compensation
Many lenders offer struggling homeowners an incentive to short sell their home. Commonly referred to as 'relocation allowance', a mortgage servicing company such as Wells Fargo or Bank of America will pay up to $3,000 to a homeowner who successfully completes a short sale. They do this mainly because it costs a lender less to have someone keep the home lived in and well maintained rather than paying attorney's fees to foreclose on the property and running the risk of the home being trashed as the homeowners are evicted, not mention the carrying costs of maintaining a vacant home while it sits on the market. For the banks, paying someone $3,000 to "take care of the place" is a deal.
Reason #3: The Future
The mentality of most bankruptcy attorneys who dislike short selling a home is one of seeking only to protect their client from immediate and imminent harm. They seek to stop wage garnishments, foreclosure activity and the seizing of one's assets. These are all admirable and important, and these activities most bankruptcy attorneys handle adeptly. But, what they don't do well is consider their client's future. The one in which financial hardship has been overcome and home-ownership is once again a reality.
Currently, the waiting periods to buy a home after a consumer has filed for Chapter 7 bankruptcy is four years after the discharge date. Bankruptcy or not, letting a home go through foreclosure will keep a family from buying again for seven years from the date the lender took back the property. Not having to wait three unnecessary years seems to me argument enough that short selling a home and staving off foreclosure is well worth the effort. Who wants to pay rent for three extra years when they don't have to?
Ultimately, the decision to short sell a home comes down to the homeowner, not the attorney, not me. Yes, there is work involved when selling a home that is over-leveraged. Financial documents must gathered. Hardship letters must be written. The home must be made available to be shown to potential buyers. Lenders must be negotiated with. All of this takes time and energy, but the net gain-- keeping another derogatory off public records, banking an $3,000 and being able to buy a home again in four years rather than seven-- far outweighs the effort involved.
Now, if I could just find all that money padding my pockets...
You see, I am real estate agent
specializing in short sales. I've been doing this since 2007, and I
have helped well over a hundred families avoid foreclosure and secure
the release of any mortgage deficiency. It's what I do.One of the primary benefits to a short sale is that it can provide enough financial relief to a struggling family so that they can forgo having to seek bankruptcy protection. But that's not always the case. Sometimes, a person's financial burden is such that bankruptcy is inevitable.
And so the question is, "Does it benefit someone in bankruptcy to short sell their underwater home?"
That was the very conversation today I had with yet another bankruptcy attorney. I was told, in uncertain terms, that the only benefit from a homeowner who has filed for bankruptcy to short sell their home is to "pad the pockets of the Realtor". (i.e. me).
Well, I politely disagreed. And then I took a breath and explained why:
Reason #1: The Public Reporting of Personal Information
Certain events in a person's life are recorded and some of it publicly recorded. When a background check is performed, information such as a person's date of birth, aliases or maiden names, information about property ownership and financial information including bankruptcies filed, judgments recorded and foreclosures against real property is made publicly available. This information is used for a variety of purposes: a property management company checking to see the risk of approving an applicant; an employer making sure an employee has reported accurate information; even parents are doing background checks on potential nannies and babysitters who would have contact with their family.
It is not the end of the world to have a foreclosure reported as a matter of public record, but I have had at least one client who worked for a tech company who was told by HR that it would be permissible to short sell his home due to financial difficulty but to let it go to foreclosure could cost him his security clearance and potentially his job.
Reason #2: Financial Compensation
Many lenders offer struggling homeowners an incentive to short sell their home. Commonly referred to as 'relocation allowance', a mortgage servicing company such as Wells Fargo or Bank of America will pay up to $3,000 to a homeowner who successfully completes a short sale. They do this mainly because it costs a lender less to have someone keep the home lived in and well maintained rather than paying attorney's fees to foreclose on the property and running the risk of the home being trashed as the homeowners are evicted, not mention the carrying costs of maintaining a vacant home while it sits on the market. For the banks, paying someone $3,000 to "take care of the place" is a deal.
Reason #3: The Future
The mentality of most bankruptcy attorneys who dislike short selling a home is one of seeking only to protect their client from immediate and imminent harm. They seek to stop wage garnishments, foreclosure activity and the seizing of one's assets. These are all admirable and important, and these activities most bankruptcy attorneys handle adeptly. But, what they don't do well is consider their client's future. The one in which financial hardship has been overcome and home-ownership is once again a reality.
Currently, the waiting periods to buy a home after a consumer has filed for Chapter 7 bankruptcy is four years after the discharge date. Bankruptcy or not, letting a home go through foreclosure will keep a family from buying again for seven years from the date the lender took back the property. Not having to wait three unnecessary years seems to me argument enough that short selling a home and staving off foreclosure is well worth the effort. Who wants to pay rent for three extra years when they don't have to?
Ultimately, the decision to short sell a home comes down to the homeowner, not the attorney, not me. Yes, there is work involved when selling a home that is over-leveraged. Financial documents must gathered. Hardship letters must be written. The home must be made available to be shown to potential buyers. Lenders must be negotiated with. All of this takes time and energy, but the net gain-- keeping another derogatory off public records, banking an $3,000 and being able to buy a home again in four years rather than seven-- far outweighs the effort involved.
Now, if I could just find all that money padding my pockets...
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