If you lose your home to Foreclosure . . .
If you cannot afford to pay for your home, if you cannot eventually get a loan modification, if a Chapter 13 just won’t work for you, then you will lose your home. Even if you do a chapter 7 and avoid a foreclosure for a little while, if none of those other options will eventually work for you, then you will lose your home.
Keep in mind that a fantastic option is available but only if you start early enough. Short Sale can help you immensely by avoiding a foreclosure which means a much smaller hit on your credit than a foreclosure. Your realtor who is probably a relative or close friend will get a commission, the bank will get paid better than it would have if you’d gotten foreclosed and it’s a win win win situation. If your Realtor is a close relative or family friend, then think of what it means to keep the business in the family. Because if you’re going to lose the property anyway, why wouldn’t you help your siblings and friends pay their bills too.
At that point, once the home has foreclosed and/or been repossessed by the bank, within a few days, usually only 2 or 3, a Realtor working for the bank will show up and ask you to move. When they do, they’ll often offer you some moving money. Usually it’s about $3000. I believe there’s an Obama stimulus plan which reimburses the bank up to $3000. A client of mine told me that his offer went like this: $3000 if they were out in 2 weeks, $2000 if out in 3 weeks and No thousand dollars if longer than 3 weeks. Behind the money is the hope on the part of the bank that if you expect to get paid, you’ll have to leave the property in a livable condition, not scrubbed but clean, carpets not shampooed but the house broomed out. Above all, they want the sinks, faucets, toilets and carpets to still be in the place once you’re gone.
Most of you in this situation have probably already started looking and maybe even found a place to go. I recommend you keep enough furniture in the house to make it look like you still live there, if you have moved, they won’t offer you anything.
Broom cleaning is usually all that’s required and sometimes they’ll ask you to leave the major appliances behind. If they are yours and you cannot afford to replace them, let the realtor know that you have take them with you. Usually you can work something out and these are much less critical than are the sinks, faucets, doors, door knobs, carpets and toilets.
The agreement between you and the real estate agent for the bank will state that you must have the place empty on the last day, and that the real estate agent will inspect the property before turning over the check. If you haven’t cleaned all the trash out of the garage, you’re not getting the check. If you have packed up the sinks, faucets, carpet and toilets, you might as well not both showing up to ask for the check. Besides you don’t want to walk out with fixtures because there’s a good chance the bank will sue you.
Your Landlord has a Foreclosure
If your landlord has a foreclosure on the property that you’re living in, you have a unique situation. Now the bank must be really nice to you. The law requires that they give you the cash for keys and that they give you more time to move.
My personal favorite part is this: the landlord can no longer do an inspection and determine how much of your deposit he has to pay you back. If you are paid current on the rents, he still must send you a settlement letter within 3 weeks and pay back your deposit. However, you and I both know he doesn’t have it. If he doesn’t send the settlement letter and payment on time, you can sue him for 3 times the balance due to you. If your deposit with $1500 you sue him for $4500 in small claims.
If he files a bankruptcy on it, and tries to say that the deposit is discharged in bankruptcy, you tell him that it was money held in trust and therefore not dischargeable. You will want a bankruptcy attorney who does creditor’s work to help you and you will have to do it during the bankruptcy or you may lose your rights.