Receiving notice of a pending foreclosure suit is distressing but it is not an impossible situation. With the proper guidance and counsel homeowners can navigate the foreclosure process and take advantage of opportunities to defend their home.
A common misunderstanding people have is that the Lender holds all the cards. This is not true! There are several options that are available to you during foreclosure. Some of the most common options are: Deed-in-Lieu of Foreclosure, Consent to Judgment with Waiver of Deficiency, Short Sale and Cash for Keys. Contact one of our experienced attorneys to see if one of these options is right for you.
1. Cash for Keys
Cash for Keys is a situation where the bank actually pays you for your home. If your home is in “broom swept condition”, meaning all fixtures and landscaping are intact, the Lender will give you a certain sum of money for you to vacate your home within a certain number of days.
2. Consent to Judgment (with waiver of deficiency)
This is a situation where you walk away from your home. You allow the judgment of foreclosure to be entered against you, and the Lender agrees that it will not go after you for any deficiency. A deficiency is the difference between the amount you owe the Lender and the amount your home is sold for. There may be tax consequences upon the waiver of the deficiency. Call one of our experienced attorneys for a more detailed discussion about whether this option is right for you.
Caveat: At the very minimum a homeowner should seek a waiver of deficiency. The Internal Revenue Service may classify the amount waived as income and subject to income tax. Regardless of what you owed when you defaulted, that amount will have significantly increased once litigation begins due to unpaid principal, interest, property inspection fees, and pre-acceleration late charges, to name a few. Even worse, it is unlikely the Lender will be able to sell the home for what is owed, leaving you still owing a balance. See the example below:
Original Mortgage: $200,000
Owed at time of Default: $150,000
Amount owed after litigation is in progress: $225,000
(Principal, interest, property inspection fees, and
pre-acceleration late charges, etc.)
Home Sold For: $150,000
3. Short Sale
This option allows the homeowner to attempt to sell the home at a price below what is owed. In a short sale, the Lender agrees to remove it’s lien in exchange for the proceeds of the sale, even though the proceeds are less than what is owed. There may be tax consequences from a short sale due to the Lender’s waiver of the deficiency. The IRS may classify the amount waived as income and subject to income tax. Call one of our experienced attorneys to see if this option is right for you.
4. Deed in Lieu
A Deed in Lieu avoids the foreclosure all together. In this option, the homeowner will give the property to the lender in exchange for the Lender not pursuing a foreclosure lawsuit. The homeowner signs the deed over to the Lender.
Call today to speak to an attorney experienced in foreclosure defense. Consultations are always free, (321) 631-0506.