Every Short Sale Needs A Buyer

We have a home in punta gorda florida that we were going to move to, but we had to shut down our business over there and stay on the east coast as there is no more demand. 

We have a first and second with wells fargo.  Current for now on both, mortgage is in my name only. 

Will they negotiate a deed in lieu of foreclosure or will I still have a deficiency. 

First is 200k and 2nd is 148k.  Value is around 200-225 – nothing in area is selling. 

Should we get an attorney, not sure how to proceed.

Deb

———

Hi Deb,

Whenever anyone asks if they should get an attorney, they’ll never get an objection from this author.  There are legal issues having to do with every aspect of credit/debt and only an attorney can provide legal counsel to a consumer.  And now without further ado my unqualified opinion. 

The deed in lieu would require the cooperation of the second mortgage, so generally speaking, that’s probably not an option with a balance that high.  A deed in lieu is one step above a foreclosure and mortgage lenders consider a DIL to be the same as a foreclosure.

Speaking of foreclosure, if that first mortgage forecloses, then the second mortgage will have its lien extinguished but the promissory note will remain in full force and does not go away.  Florida Statute 702.06 permits lenders to pursue deficiency judgments.  This means the first mortgage lender has that option.  The second, however, may bring a lawsuit based on a cause of action for written contracts which in Florida can extend out five-years from the date the borrower stopped making payments (I don’t believe the world will be around that long but that’s a subject for another post).  Anyways, the ideal situation to handle all of this is with a short sale and hopefully, a short sale with a full release of liability.

Here’s where an attorney is lacking. Every short sale needs a buyer and an attorney is not going to purchase your property.  For many short sellers, I am pleased to be that buyer. 

I enter into a contract to purchase the property as a short sale and my loss mitigation company submits the short sale and negotiates for an approved short payoff.  That generally takes about sixty-days or so.  Once the short sale is approved, the property can be sold either to myself (if a great short sale was negotiated), or to another buyer (if a better than average short sale was negotiated).  If only a so-so short sale is negotiated then, unfortunately, the property will sit and most likely won’t sell.  This is a problem in the market today.  Real estate agents knock $50,000 off a mortgage balance and think they have an ‘approved short sale’.  Don’t get me wrong, they do have an approval from the shorting lender to accept less-than-the full balance; however, this market has sunk like a rock and for a property to sell in this market, it has to be the best value in the neighborhood period.

So, to recap, a deed in lieu generally works when there is only one mortgage and the DIL is only marginally better than a foreclosure.  The short sale with a full release of liability is best.  While only an attorney can provide legal advice, nevertheless it takes a buyer to get to a price.  A sure way to get a property sold in this market is to negotiate a great short sale.  The better than average negotiated short payoff might get the property sold too.  There are some of the issues surrounding a short sale or deed in lieu.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.