Q: Our home is underwater by about 20 percent. We like our home and can afford it every month. It is in a good neighborhood, and we put about $80,000 in upgrades into it. However, we are very concerned that it is underwater and don’t want to throw good money after bad. Should we short sale the property? – Kim

A: No. I get a lot of questions like this from people who find out they are underwater and want to get rid of a perfectly good home that they loved just a couple of years ago. These same people seem to have no problem buying a new car and watching it lose a third of its value when they drive off the lot. Not one of them has made a U-turn and tried to short sell the car a week later. Seriously, it is important to remember that a home has a price only on two days: the day you buy it and the day you sell it. If you like your home, your neighbors and your school district and can afford to make the payments, it is not wise to uproot your family, ruin your credit and put yourself through all sorts of pain. As long as you are staying in the home for a while, and you are not that far underwater, know that it will regain its value, and you can enjoy living there for some time to come. It beats paying rent for a house you do not like as much. My advice may be different if you bought a condo at the height of the boom for $250,000 and it is only worth $40,000 today. But for anyone who isn’t too far underwater, likes where they live and can afford the payments: Rest easy and count your blessings.

Q: My wife and I are about to be divorced. We agreed that she would keep the house, and I am going to quit claim deed it to her, pursuant to the court order. We took out the mortgage together on the house several years ago. Am I off the hook? – Fenton

A: No. When you take out a mortgage, you are actually signing two important documents: the note and the mortgage. The note is your promise to repay the bank, and the mortgage is your pledge of the house as collateral to assure repayment of the note. The note you signed is a binding contract in which you agreed to pay back your lender, whether you still own the property used as collateral or not. The divorce court can deal with the property rights between the husband and wife, and it can even order your ex-wife to pay the note, but it can’t force your lender to release you. So if your wife does not pay back the loan, then you will have to.

Q: I have been under contract on a short sale since November as the buyer. The seller’s real estate agent has been dragging his feet. The short-sale was approved with the wrong name, and he supposedly resubmitted the contract to the seller’s bank. I understand short sales take a long time, but can I or an attorney do anything to speed up the process? Can I contact the bank? – Brad

A: Maybe and yes. Sometimes a short sale can take an awful long time despite everyone’s best efforts. Other times the seller or his representative is either dragging his feet or he just simply does not have a clue what to do. When you enter into a short sale purchase as a buyer, you need to be sure that the seller is serious and motivated and the seller’s representative, whether attorney or not, has the experience and know-how to get it done. I personally think only attorneys should negotiate short sales with lenders because the sellers have serious legal concerns that are best addressed by an attorney. I am aware that some non-attorneys successfully negotiate short sales, but there are serious risks to which they may expose the seller. I am a firm believer that professionals should stick to their professions: real estate agents should sell houses, loan officers should make loans and attorneys should negotiate contracts. If the person negotiating for the seller is new at the game, you are in effect that person’s training project. I recommend that you let the newbies learn on someone else’s deal. Further, you will want to make sure that you are getting regular status updates and copies of notices and emails to and from the lender. You should demand this in the contract before you enter the deal and make sure that you follow up on it. If the seller does not seem to be getting the job done, you need to know when to walk away from the deal and find a different house to buy.

The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed, nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.

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