FLORIDA LAW TALK

Dream home may be out of reach

2012-04-13T13:41:32Z

Q: We had a high interest rate on our home that’s “underwater.” Last year, we got our loan modified, but we want to move because the neighborhood has gone downhill. We recently found our dream home, but we were told by our real estate agent that we are not eligible for a mortgage for two years because of the loan mod. We were also told the bank won’t consider rental income because there is no equity in the property. Are we out of luck? – Betty

A: Probably. There is no ban on getting a new mortgage after a loan modification, but the events leading up to the modification -- such as being late on the payments -- may disqualify you from getting a new loan right away. Also, a loan mod may negatively affect your credit. Lenders are wise to the idea of getting a new loan and then abandoning your existing home. So unless there is a significant amount of equity in your existing home, you will need to show enough income to carry both homes without the benefit of rental income.

Q: I am under contract to buy into a condominium building with only five units. Three of the units are owned by one person, and the last unit is listed for a short sale. Will I be caught holding the bag and paying all of the dues for the entire building if the other owners stop paying? – Tara

A: You are wise to be concerned about this. If one of the other owners does not pay the dues, you may have to carry the burden yourself. It will be difficult to vote anything your way because one person owns a majority of the units. Because every association is different, I would recommend seeking legal counsel.

Q: In your column last week, you said that a wife would not be responsible for her husband’s mortgage if she did not sign the promissory note. I just got served with foreclosure papers, even though I didn’t sign my wife’s note. What gives? – Robert

A: While you are not responsible for your spouse’s debt, you do have an interest in the property that the mortgage lender needs to overcome to complete the foreclosure. As a spouse, you may be on the deed to the property, and even if you’re not, your status as a spouse means that you have a potential interest in the property. Real estate attorneys call this potential interest a “cloud on title.” If the lender is successful in the foreclosure lawsuit, you will not be responsible for the remaining debt, but you will have a judgment against you in the public records.

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.

To follow Gary Singer on Twitter, click here.

Will mortgage debt transfer to wife?

2012-04-13T13:39:55Z

Q: I bought my house in 2006, and I owe $190,000. It’s now worth about $50,000. Yikes! I recently got married, and the neighborhood scares my wife. Safety is an issue, and we want out of the neighborhood. If my wife buys a house and I complete a short sale or get foreclosed on, can the lender come after her? – Jonathan

A: No. Debt is individual to the person, and it does not transfer to a spouse or other relative, unless they voluntarily agree to assume the debt. But during your wife’s application process, her lender may look at your housing situation to make sure you are current.

Q: Several years ago I bought a property with my girlfriend. Both of our names are on the title. But because of credit issues, only I am responsible for the loan. We broke up, and I am trying to complete a short sale on the property, but she is not cooperating. What can I do? – Bob

A: While you do have some options, you are in a tough spot. In order to sell a property, all its owners have to agree to sell. You may want to explain to your ex that it is in her best interest to cooperate. That’s because if the lender sues for foreclosure, she will be sued as well, even though she is not obligated to repay the loan. That could negatively affect her credit. You may be able to take legal action against her, but the lawsuit may be difficult and expensive. It’s a good idea to have a written agreement in place before you own property with someone to whom you are not married.

Q: What happens when a homeowner stops paying the homeowner's association dues and other charges and continues to live in house? What recourse does the HOA have? Secondly, what happens when the property is sold? What money can be recovered by the association for the unpaid dues and assessments? – Harriet

A: Almost every association has the ability to place a lien on the property for non-payment of dues and then can foreclose on that lien and take the home. When the property is sold, the homeowner will have to leave the property. The association, or whoever won the foreclosure auction, will be the new owner. However, the homeowner will still owe the lender the money from the mortgage loan and that lender can even foreclose the house out from under the association. If it does this, the owner will be credited the market value of the home but will still owe the lender for any deficiency. Also, if the bank forecloses while the former owner owes back association dues, the association can pursue the former owner personally for the money, even if the house now is owned by the bank. If it sues, it can get a judgment that would allow it to take other property and garnish wages.

To follow Gary Singer on Twitter, click here.

Should I buy a home in 2012?

2012-04-13T13:34:04Z

Q: With the market up and down and with elections on the horizon, my husband and I are unsure about whether we should buy a home. We don't want to wait too long and have prices go back up. What are your thoughts on buying in 2012? – Emalita

A: Buy. The housing market is nearing a bottom in many areas. However, I think this recovery is fragile, just like the beginnings of a recovery in the economy. Unforeseen events certainly could cause another dip in prices. Even if this occurs, I don't think that most areas will drop very much. And temporary declines don’t matter as much to people who buy and intend to live in the home long term. Interest rates seem to be on the rise, and that will cause mortgage payments to rise as well. I would start planning to buy, but don’t be in a rush.

Q: I have a 30-year Federal Housing Administration loan and am paying mortgage insurance as required. If I die, does the mortgage insurance pay off the loan and does my estate get the deed? – Clifford

A: No. The mortgage insurance that you were required to buy when you got the loan covers the lender from its losses if you default. It does not protect you at all. As a matter of fact, if the mortgage insurance company has to pay out a loss to your lender based on the policy, the insurer may sue you to get the money back. If you are looking for an insurance product to pay off the mortgage when you pass away, you will want to purchase a life insurance policy. You can buy a general policy that will pay money to your designated beneficiaries who can spend it how they like, or you can buy a policy specifically designed to pay off your mortgage.

To follow Gary Singer on Twitter, click here.

Can I buy right away after a short sale?

2012-04-13T13:32:58Z

Q: We began our short sale on our condo last year, and we're still not finished. We were initially told that if we are current on our payments and our short sale is complete, we would be able to purchase another home without a problem. Is this true? – Kia

A: If you never missed a payment, your credit should still be reasonably good and there are banks that likely will lend you money right away. But most people who complete short sales fell behind on payments, and it could be a couple of years before they can get another loan. Each lender has dozens of programs that you may qualify for and there are literally hundreds of lenders out there. Obviously, if you’re paying cash, there’s nothing stopping you from buying a home at any time.

Q: I bought a home a few years ago when I was single, and I recently got married. I put my wife’s name on the home so that we own it together, and we recorded the deed with the county. I received a fairly large tax bill for the transfer. I didn’t sell my wife half the property; I just put her name on it for estate planning purposes. Do I owe this tax? – Bud

A: Yes. Whenever you transfer a property in Florida, you must pay documentary stamps tax on the sales price. It doesn’t matter who you’re transferring it to or what type of deed it is. If you are not selling the property for money and there is a mortgage on the home, the tax man will consider the unpaid balance of the mortgage as the sale price when computing the taxes that you owe for the transfer. If the property is owned free and clear of any mortgage and you transfer to your spouse or close relative and the only compensation that your receive in return is their “love and affection,” then there is no tax. There are also some other exceptions, such as when you have to deed the marital home to your ex-spouse pursuant to a court order, or when you transfer your home to a revocable trust for estate planning purposes.

To follow Gary Singer on Twitter, click here.

How homebuyers ruin short sales

2012-04-13T13:31:53Z

Two weeks ago, I wrote about mistakes sellers make to kill short sales. Buyers also end up ruining these deals or making things more difficult than they need to be. Here’s what they need to avoid:

Not doing enough research on the seller and the mortgage before you commit. Are the husband and wife getting a divorce and will both spouses stay cooperative all the way through? Do they have two mortgages, which will make the negotiations with the bank more difficult? If you sense the deal could drag on longer than a few months, find another house.

Failing to check up on the seller’s representative who will negotiate with the bank. The key to completing a short sale is checking in with the bank at least weekly. Otherwise, the case will stall because the lender likely has thousands of other short sales to consider. This short sale probably isn’t the only one your seller’s rep is negotiating. So don’t be shy about insisting on regular updates.

Being too picky on price. If you are trying to get the deal of the century and the bank wants a little more money, it probably makes sense to kick in the extra cash. There’s no use in walking away from a steal just because you have to pay a little more. That’s the kind of thing buyers tend to regret later.

Spending money before you have to. After you sign the contract and wait for the bank’s approval, don’t start ordering inspections and appraisals and applying to the homeowner’s association. If the deal doesn’t go through, you’ll be out that money and very unhappy.

Getting caught flat footed on your own mortgage. Once the seller’s lender accepts your offer, it likely will want to close within a month or two. That could be a problem if you don’t have your loan approved. There’s plenty of time to get that done while the seller’s bank is considering your offer.

To follow Gary Singer on Twitter, click here.

Loan mods tricky for military personnel

2012-03-14T17:06:04Z

Q: We have never been late on a single mortgage payment and have great credit, but as active duty military, we can’t live in the home because we’re being assigned elsewhere. Every refinance option we have explored makes current residency a requirement for the program. Is there any refinance or modification option for an underwater mortgage in which the owner is not currently living in the home? – MJ

A: Probably. You are correct that most, if not all, of the government-sponsored programs require that borrowers live in the homes as their primary residences. I am assuming that you are renting the house to a tenant in your absence and that’s why you are being turned down. If the house is sitting vacant while you are deployed, then it still might be considered your primary residence. I suggest that you call your lender and explain the situation. Many lenders have internal programs that may help you to lower your payments through a loan modification. Also, if you bought the home using your Veterans Affairs loan benefit, you might be able to refinance via the Interest Rate Reduction Refinancing Loan program. There are a lot of programs out there, so I strongly recommend that you keep trying.

Q: My partner owns a condo that is worth much less than the mortgage. I am not on the loan, and we live together but are not legally married. He is retired and on limited income and barely makes ends meet. We hear horror stories about how banks will not talk to you about modifying your loan unless you have not paid for at least two to three months. We would like to stay here but cannot unless our lender reduces our monthly payment. In addition, at our age, we will never live long enough to pay off the mortgage. What can we do? – Robert

A: Call his lender and try to obtain a loan modification. I have experienced some situations in which a lender has told my client that he or she will not be considered for a loan modification while current on the payments. But I also have negotiated plenty of loan mods when the borrowers are current. The point is that you have to try to get it done. Also, even though your partner may not have enough income for a modification, the lender may also consider your income if you are helping to support the household expenses. I would suggest that you try to get the modification while staying current on the payments, if at all possible.

To follow Gary Singer on Twitter, click here.

How not to mess up your short sale

2012-03-02T16:38:25Z

For many people, unloading your home for less than the mortgage amount is a great way to get out of a bad situation. Unfortunately, getting to a short sale closing is a delicate process. It’s like a house of cards – one wrong move and it falls apart. The following is a list of common mistakes a seller makes to derail the short sale:

• Failing to stay current on the homeowner’s association dues. I have long said that being behind on your association fees is the No. 1 reason short sales don’t go through. You need the HOA's approval to close on the short sale, and you can forget about getting that approval if you're behind on your payments.

• Having unrealistic expectations. Just because your neighbor’s brother’s uncle’s ex-boss got $30,000 from the bank at the closing of his short sale does not mean that you should expect the same. Yes, it would be nice if your lender gave you a little going-away present, but don't reject a perfectly good deal if you don't get the money. Your two most important goals are to get out of a bad mortgage and have the bank forgive the debt.

• Not cooperating with your lender. Your lender will need various items and documentation from you and your real estate agent throughout the process, and it will want the information quickly. If you wait too long, or decide that your lender “really doesn’t need” the item it is asking for, you likely will be declined.

• Not telling the truth. Sometimes your lender will actually verify the information you provide, and if it doesn’t match, you will be turned down.

• Having other liens or judgments against you. Often a lender won't approve your deal if you have a judgment against you from another creditor. You may want to fix this before you start the short sale or at least find out if it will be a problem in advance.

• Working with skittish or unqualified buyers. Short sales can be a long process. You need to make sure that you will have a buyer who is patient and flexible and can actually close.

• Giving up too soon. You may get turned down a couple of times before you get approved. If you quit, it’s an automatic no.

• Hiring the wrong people. The lawyer or real estate agent you hire to negotiate the short sale must be diligent about staying in touch with the bank. Even with a good representative on your side, these deals can drag on for months. You have almost no chance if you don't have the right rep. Be prepared to nudge him or her to get the deal done. Remember that the squeaky wheel gets the oil. Insist on weekly updates.

To follow Gary Singer on Twitter, click here.

4 Keys to getting lower mortgage payments

2012-02-24T16:00:00Z

Q: My dad passed away four years ago and my mom was scraping by working at a department store until recently, when she had to stop due to an illness. Although my mother has good credit, we have been unable to refinance or lower the payment. It makes no sense because we keep hearing about all of the programs out there to help people. But it seems that there is nothing for someone who needs it the most. – Dave

A: Don't be so sure. There are many programs out there that can help reduce your loan payments. It comes down to four factors: math, persistence, luck and realistic expectations. By math, I mean that your income, bills, home value and mortgage must fit into one of your lender’s programs. As for persistence, many people get turned down two or three times before they get approved, so if you stop trying you’ll never get the relief you’re seeking. There is an element of luck involved in all of this. Did you randomly get a bank representative who will go the extra mile to help you, or the one who is in the middle of a divorce and hates his job? Finally, it’s important to have realistic expectations. I have seen many people turn down a terrific loan modification offer from the bank to wait it out for some magical solution that’s never going to happen.

You need to get an idea of what type of relief that you may qualify for, and see if that relief will work for you. For example, if you earn $700 a month in Social Security as your only form of income and you are trying to modify a $300,000 mortgage, it is highly unlikely that you are going to be offered a solution because the math just doesn’t work. If you earn $200,000 a year and are trying to modify your $190,000 mortgage, it’s doubtful that your lender is going to see things your way.

Q: Our mortgage is underwater and we would like to move out of the immediate area. I need some good advice. I'm reluctant to just pick up the phone an call anyone because I don't want to become a victim of a scam. Do I call a law firm? A real estate agent? A loan modification company? Who? – Hal

A: Call a lawyer experienced in dealing with struggling homeowners. He or she will help you figure out a strategy that may involve a short sale or a loan modification. Each person’s situation is unique and each situation should be dealt with individually. Do some Internet research to find out about lawyers in your area and then choose two or three to interview. Ask questions such as: How many cases have you handled similar to mine? Do you have any special training or certifications related to real estate law? You should also take to the appointment appropriate paperwork about your financial situation and your house. Bring proof of income for all wage earners, two years of tax returns, a recent mortgage statement, your tax bill, your insurance bill and any other paperwork that you think is pertinent to your individual case. Think about your goals. Attorneys are, by training, goal-oriented people, so tell the attorney about your goals so he or she can craft a custom plan that works for you. Bring reasonable expectations and a willingness to listen.

To follow Gary Singer on Twitter, click here.

How to get what you want from your lender

2012-02-24T15:56:27Z

For the first few months that I wrote this column, I would consistently hear from my editor that a bank is not a "they” but rather an “it.”

I would write something such as, “Call your lender and see if THEY will help you” and he would correct the sentence to “Call your lender and see if IT will help you.” I finally caught on. But I notice that most of my clients refer to the bank as “they.” I wisely don’t say anything, deciding that I'm there to solve my clients’ issues -- not to correct their grammar. However, what we say is an indication of what we think, and what we think determines how we approach the various problems that we all face from time to time. A bank is a thing -- an inanimate set of policies and procedures created to provide value to its customers, who, in turn, help create profit for the business’ owners or shareholders. The bank doesn't have feelings or emotions, but it does have goals. If you recognize this and act accordingly, you will find it much easier to get want you want from your bank.

For example, if a bank was a “they,” it might be concerned with all of the intimate details of the hardship that caused you to stop making your mortgage payments. But in reality the bank primarily looks at your financial information to see if it fits into any of the programs that the bank may have in order to offer you a loan modification or a short sale.

Many homeowners get frustrated with the lender as if it were a thinking, emotional individual. Yes, the bank is run by people, but they are employees who have to follow the bank’s policies. And those policies are set by executives who won't ever see your file. That's particularly true with large lenders.

You are much better off thinking of your lender as a machine -- a computer that can offer you a solution only if you provide the necessary information in exactly the way it asks for it. Remember the old saying: You can’t make a silk purse out of a pig’s ear. Likewise, you can solve your housing and lending problems more easily if you don’t think of your bank as something it isn’t.

To follow Gary Singer on Twitter, click here.

I have an underwater mortgage but love the house

2012-02-24T15:49:26Z

Q: I have an underwater mortgage. My wife and kids really like the house and neighborhood, but all my friends wonder why I continue to pay on a loan that’s worth more than the house. Should I stop making payments and try for a short sale? – Ralph

A: I don’t know why you would do either. The simple truth is that your home’s current market value should have little bearing on what it's worth to you. Owning a home is so much more than a business transaction. Before you decide what to do with your property, you have to ask yourself what is driving your decision. Do you need to move now? Is the neighborhood unsafe? Is it in a bad school district? Does your next-door neighbor snore REALLY loud?

If you like where you live, can afford your payments and aren’t being forced to relocate, then it doesn’t really matter if your home is underwater. I have seen far too many people blow their credit, be subject to a foreclosure lawsuit and lose many nights of sleep before realizing that maybe they should keep their home after all. So my advice is that if you like where you live and can afford your payments, focus on the positive things in life, such as playing with your kids in your backyard or talking to your neighbors over the back-yard fence about the Giants’ big win. A lot of people got into this mortgage mess because they unsuspectingly followed their friends’ lead in buying a house they did not like or could not afford because they “didn’t want to miss out.” Don’t make another mistake now by giving up on a home you love.

Q: My tenant moved out of the apartment that I rented to him and left behind about $400 worth of random stuff. What do I do with it? – Nancy

A: Florida, like most states, has specific laws to deal with abandoned personal property left behind by a tenant. The Disposition of Personal Property Landlord and Tenant Act requires that you mail or give your former tenant a specific form, telling him or her where the property is and allowing 15 days to claim the property. If the property is worth more than $500, then it should be sold at an auction, with the proceeds defraying the cost. Anything unsold should be sent to the county clerk’s office, where it may be claimed by the former tenant for one year. If it is worth less than $500, it may be kept by the landlord, sold or destroyed if it is not claimed.

To follow Gary Singer on Twitter, click here.

Will Obama's new mortgage plan make a difference?

2012-02-24T15:47:52Z

Q: I heard in the State of the Union address that President Obama has a new plan to fix the mortgage situation and help struggling Americans. I’m also having some problems with my mortgage, and my property is underwater. Is this plan going to finally save me? -- Anonymous

A: I’ve been asked a lot in the past few days whether President Obama’s plan to fix the housing crisis will actually work. The plan being proposed by Obama is the third bite at this particular apple. Similar plans were adopted by then-President Bush and later Obama. Both of those previous plans had little effect. In this latest initiative, the homeowner must be current on his or her payments and can only refinance the mortgage as long as the loan to value does not exceed 140 percent. Later, if there is a foreclosure on the new loan, the federal government will pay back the lender some, if not all, of its losses. The President’s idea is that when the government refinances loans at a lower interest rate, homeowners will take the savings and buy other items, thereby helping the economy. Other tenets of the program include a homeowner's bill of rights and the bulk sale of foreclosed homes to investors.

Pundits are saying that this program is unlikely to be approved due to political infighting. That may not be such a bad thing because I see little different in this program for the average homeowner. I don’t think this program would do enough to improve a homeowner’s situation. The people who need the most help are those who can no longer keep up with their mortgage payments, but they wouldn't qualify for aid. While everyone paying their mortgages would benefit from lower rates and save $100 to $200 a month, it's not enough of a savings to make a difference for someone who is $60,000 underwater on a $150,000 home.

To follow Gary Singer on Twitter, click here.

Why bother with a short sale?

2012-01-27T14:42:00Z

Board-certified real estate attorney Gary M. Singer answers housing questions in this space each Friday. To ask him a question about short sales, mortgages, refinancing, homeowner's associations or any other residential real estate topic, click here.

Q: I have been relocated, and my property is underwater. My credit is not important to me, so I am thinking about just walking away from my house as opposed to taking the trouble of doing a short sale. Is there any reason I should not just walk away? – Anonymous

A: Yes. If you just walk away, you are doing more damage than just accepting a bad credit score. You have the strong possibility of a money judgment following you for 20 years. Also, you are hurting your neighbors by not paying association dues and by leaving an abandoned property in the neighborhood. Further, there are psychological ramifications from abandoning a responsibility, hurting your neighborhood and not trying to gain closure for yourself. You and your neighbors are much better off if you work with your lender to complete a short sale or a deed in lieu of foreclosure. Aside from the benefit you gain in a legal sense, trying to do the right thing is its own reward.

Q: I just received updated paperwork, and my house has been removed from a flood zone. I have sent copies to the mortgage company. Can the bank still make me carry flood insurance? – Natalie

A: No. Under most mortgage loans, you have to carry flood insurance only if you are in a flood zone. However, in all contractual relationships, it is the paperwork that makes the rules, so check yours to make sure of the answer for your individual situation.

Q: One day I came home to find that my neighbor had cut down several mature shrubs on my side of the property line. I spoke to him about it a while ago, and he said that he thought they were his and that he would replace them with new plants. But I’m still waiting. What can I do? – Anonymous

A: You should make every effort to work this out before taking any court action. It is not a great idea to be involved in any lawsuit if it can be avoided, especially if it is someone you will see every day. If all of your efforts to resolve this in a friendly way fail, you can try to sue him. While your neighbor is allowed to cut branches and roots that extend onto his land, he is not allowed to cut anything over the property line. If you are successful in the lawsuit, you will be able to collect the value of the plants or the reduction of your property value from the neighbor. But, again, try your best not to let it reach that point.

To follow Gary Singer on Twitter, click here.

Walking away from a reverse mortgage

2012-01-23T14:20:40Z

Q: I took out a reverse mortgage when the market was high and cashed out $300,000. Now my home is worth about $100,000. We are thinking of walking away from the house. Can the bank come after us for the money? – Deanna

A: No. Almost all reverse mortgages are “non-recourse” loans, meaning that the amount that your lender can recover is limited to the value of the property. So you can move out and not be on the hook for the house. But remember that with a reverse mortgage, you get to stay in the house for the rest of your life, so you may not want to be in a rush to move just because your home is underwater.

Q: I have an underwater property and I’m current in my payments, but I have to move to a different county. My credit is really good and I’m not sure what to do because I really want to avoid damaging my credit. What can I do? – Juan

A: As you are aware, unloading your property with a short sale will damage your credit. Your other option is to rent it out. Many people are starting to rent their homes when they have to move because rental rates are very high. While it is not always easy being a landlord, you may be able to get a real estate agent to manage the property for you and still cover your existing mortgage. If this option is not appealing to you, you may want to consider the short sale. Your credit will recover fairly quickly if this is the only thing wrong with it, and you can leave the worries of your old home behind. I realize credit score is an important factor in life, but it is not the only factor and you have to weigh all of the positives and negatives to come to an answer right for you.

Q: If you hire a title company for closing, are you hiring an attorney? – Clay

A: No. A title company is a licensed insurance agent -- not an attorney or a law firm. A title company does have the responsibility to make sure you own your property free of title defects, but that’s where its responsibilities end. This applies even if the title company is owned by an attorney. Hiring an attorney to represent you at closing insures that you have an advocate. Most attorneys even can issue the same title insurance policy that the title company would have.

To follow Gary Singer on Twitter, click here.

Can a judge force a bank to offer a loan mod?

2012-01-23T14:19:49Z

Q: I saw your article about mandatory mediation in foreclosure cases. I'm in the middle of my case but due to my low income, there is no way that the bank will give me a loan modification. Is there any way to ask the foreclosure judge to force the bank to give me a modification? – Nelson

A: No. The columns we posted on mediation raised a flurry of questions. To clarify: Most courts will order the lender to go to mediation and make a good-faith effort to resolve their differences. However, the results of the mediation are voluntary and confidential, so while the judge can force a party to participate in the mediation, he or she can’t force the parties to agree to anything.

Q: We have been trying to complete a short sale on our home for more than two years. Our lender kept denying it or asking for too much money for the house. About six months ago, we got fed up and stopped paying the homeowner’s association dues. A few months ago, our lender sent us a package to complete a deed in lieu of foreclosure. We quickly filled it out and sent it back. We were just told that because our HOA dues are delinquent, the bank will not accept the deed in lieu. Can it do that? – Anonymous

A: Absolutely. A short sale, a loan modification, and a deed in lieu of foreclosure are voluntary settlements with your lender. As such, your lender can and will put certain strings on the agreements, such as requiring you to be current with your homeowner’s association. This is one of the requirements on most of the deed-in-lieu agreements that I have seen. Further, most of the agreements will allow the bank a certain amount of time after you submit your paperwork to check out your housing situation to make sure that the association is paid up, there are no title issues, etc. Remember that until the bank also signs the contract, it is not binding. I have said it before and I will say it again and again: Associations are the No. 1 killer of short sales and deeds in lieu. If you are planning on staying in your home with a loan mod, or are looking to complete a short sale or give the property to the bank, you need to make sure that you are current with your HOA even if you aren't paying the mortgage.

Q: I am purchasing a foreclosure. What are some things I should look out for? -- Karen

A: A home inspection is a must. You should also hire an inspector qualified to detect tainted Chinese drywall. Remember, the lender has no duty to disclose (and probably doesn’t know about) any problems that may exist. Here are a few other things to consider when buying a foreclosure:

• Review the court docket to make sure that the foreclosure was properly performed and there are no pending problems.

• Check to make sure the homeowner’s association is paid in full.

• Have an unrecorded lien search performed with the city and county, because a foreclosure is likely to have code compliance or permit issues.

• Have a survey done to make sure that there are no boundary issues.

• Carefully review the title commitment from the closing company, paying special attention to items excluded from coverage.

To follow Gary Singer on Twitter, click here.

Why do I have to wire my money before closing?

2012-01-23T14:07:08Z

Q: I am getting ready to close on my new home. The settlement company is insisting that I wire the funds prior to the closing. The contract allows for a cashier’s check, but the company will not accept that. What’s the big deal? – Ray

A: Recently, most settlement companies and attorneys, including me, have gone to a “wire only” policy for closing funds. There has been a spike in fraudulent cashier’s checks and money orders, greatly increasing the risk to the closing agents. By accepting your file to work on, the closing company tacitly agrees to abide by the terms of your contract, which allows for cashier’s checks. But your contract also will speak to collected funds being necessary to complete the closing. Since collecting cashier’s checks can take five days or more, this will delay your closing and possibly even jeopardize it. If you insist on using a certified or cashier’s check, you will need to make sure to have it to the closing company in time prior to the closing. Because this in unrealistic given the last-minute nature of most closings, you will need to send a wire. Remember that your settlement agent is asking for the wire to protect all of the parties involved in the transaction, so it’s best for you to go with the flow.

Q: You recently wrote that mandatory mediation in foreclosure cases is rarely productive. I went to court-ordered mediation and got a loan modification done. What gives? – Bob

A: Statistically, Florida’s mandatory mediation program for primary residences has been very unproductive in producing a loan modification at the mediation. As a result, the Florida Supreme Court did away with the program last month, though certain counties may still require mediation. I am a fan of court-ordered mediation. A judge ordering mediation can force the bank to make a good faith effort to work something out with the homeowner. Also, mediation may be of help to certain borrowers, letting them see that their expectations are unrealistic and pushing them to look at other options.

To follow Gary Singer on Twitter, click here.

New Year's resolutions for homeowners

2011-12-30T15:04:04Z

The beginning of a new year is when many Americans take stock of their lives. And with this being a housing column, I offer 10 New Year's resolutions for homeowners, in no particular order:

1. If you have been stressing out about being “underwater” on your mortgage, now may be a good time to discuss your options (short sale, deed in lieu of foreclosure, walking away, staying put) so that you can make a final decision and be at peace with that decision.

2. If you're struggling to make your mortgage payments, call your lender and see if a loan modification may be available to you. Banks are still difficult to deal with, but the process is getting a little easier.

3. Check with your county property appraiser to make sure that you are getting all of your property tax exemptions and discounts you're entitled to. Besides discounts on your primary residence, you may be eligible for discounts based on disability, spouse’s death, low income senior, disabled veteran, active-duty military and more. While you’re at it, make sure that the appraised value of your property is on target.

4. If you have not done so already, get a windstorm mitigation inspection done. It can save you significant money. But be informed about the process.

5. Make sure that your homeowner’s insurance coverage is correct. With declining home values, many people are now over-insured and paying for coverage they no longer need.

6. Check to see if you still need to maintain flood insurance because the flood zone maps have changed.

7. Make sure that the title to your home is properly vested to save money and troubles for your loved ones when you pass away. A properly drafted deed can save thousands of dollars in probate expenses after you’re gone.

8. Have your will checked if it is more than five years old. If anything has changed, have a new will drafted or your existing one amended. If you don’t have a will, get one. It isn't as expensive as you might think -- less than $500, in some cases.

9. Take a walk around your house with a pad and pen. Make a list of all of those small repairs that you have been meaning to do and then do them. It is much easier to accomplish chores if they’re written down and making small repairs now is much less expensive than making large repairs later.

10. Consider renovating your bathroom or kitchen. Home renovations cost a lot less now than just a few years ago. It may be a good alternative to moving.

To follow Gary Singer on Twitter, click here.

When the bank rejects your short sale

2011-12-23T17:17:20Z

Q: I applied for a short sale, submitted all the paperwork and waited for months to hear back from the lender, only to be rejected. The bank has not yet filed a foreclosure action against me. Can I put the house back on the market, find another buyer and resubmit the paperwork in hopes the bank will approve it the second time around? – Anonymous

A: Yes. The old adage “if at first you don’t succeed, try, try again” is custom made for short sales. The key to getting a short sale or loan modification completed is persistence. In my personal experience, it’s just as often the second or third try that’s approved as the first. Here are two real life examples:

Client One: He made a good living and came to us to try a short sale on an investment property that was about 50 percent underwater. On the first try, the bank would not even consider it. On the second try, the bank would approve it, but not waive the deficiency and wanted a $30,000 contribution from the seller. On the third try, the bank approved the short sale, waived the deficiency and asked for no money from the seller.

Client Two: The bank came back with an appraisal that was 30 percent higher than market value for the home. That killed the deal. The homeowner waited six months and found another buyer. This time, the bank agreed to the valuation and even gave the seller money at closing to cover his moving costs.

If a short sale falls through, you (or your lawyer) don’t have to wait a set amount of time and can resubmit the paperwork immediately, if you want. If the bank has not filed for foreclosure, it may start the process. Deal with that separately, but don’t give up on the short sale.

A successful outcome depends not only on the homeowner’s circumstances, but also on what programs the lender is offering at the present time and which employee the bank assigns to your file. Some short sales close easily and some take a whole lot more effort.

To follow Gary Singer on Twitter, click here.

How long can a Realtor hold a deposit?

2011-12-16T14:35:05Z

Q: We put a deposit on a home more than two years ago, but the Realtor won’t release the money. The contract was contingent, and we properly canceled. We've requested the deposit be returned several times, but we were told we won’t get the money until the seller signs a release. What are our rights? – Barb

A: Most contracts will allow 30 days for the buyer and seller to come to an agreement over the return of deposit money. If the parties can’t work it out by then, it may be time to go dispute resolution. That could be arbitration or a lawsuit. Since contract deposits are usually fairly small, and lawyers must be paid, it’s better to work things out on your own. Remember, each contract is governed by its terms, so be sure to read yours carefully to see what your rights are.

Q: We own a timeshare in Daytona Beach. What happens if we stop paying maintenance dues and taxes? - Evelyn

A: In timeshare ownership, you enjoy restrictions in both the power over the property (typically a restrictive homeowner’s association) and in time (you only own it for a week at a time every year). But a timeshare is just like any other type of ownership in that if you do not pay your association dues, the association will collect from you and may even foreclose on the property. If you do not pay your taxes, the county revenue collector may sell your interest at a tax sale.

To follow Gary Singer on Twitter, click here.

Will the bank pay an outstanding lien on a foreclosure?

2011-12-16T14:34:12Z

Q: I have a contract to buy a foreclosed property and am ready to close. On the closing date, it was discovered that the home had an outstanding lien. The lender, Bank of America, doesn’t want to pay the lien. What rights do I have? I know if I don’t close, I lose my deposit, but what is the bank responsible for here? – Enrique

A: Good news. You should have no problem getting your deposit back in this case. As we have discussed before, in a transaction to purchase a property, the contract is king. So review your contract carefully to see what it says about this situation. If your contract reads like most bank-owned sales contracts, it will be very one-sided in favor of the bank and allow the bank to cancel your transaction for just about any reason, with no repercussions. In your case, I would be willing to bet that the contract does require the bank to pass clear title to you, so it will need to either pay off the lien or cancel the contract. It most likely can’t make you pay the lien or accept the property with defective title.

Q: My husband and I have a contract to buy a short sale for a bank-agreed price. The mortgage is in the seller’s (wife) name. It is her primary residence. The seller is in the middle of a divorce, and the estranged husband has skipped town. Will we be able to close on this property without his appearance and signature? What will happen to this property if the husband never surfaces? – Linda

A: If the property is the seller’s primary residence (homestead) and/or the soon-to-be-ex-husband is also on the title, you will absolutely need him to close on the deal. You need to get a handle on this situation before you invest any more time in this house. The only hope is to try to get the divorce court to order the husband’s cooperation, but he still may not be found. As for the property, if the wife can’t get her husband’s cooperation, they will both be foreclosed on and may face any deficiency liability as a reminder of their lost love.

Q: My mother passed away recently and owned a condo with a reverse mortgage that was underwater. I don’t want anything to do with the property. The HOA and lender keep bothering me about payments and the property. What can I do? – J.

A: In Florida, when someone dies owning homesteaded property, it’s automatically transferred to the decedent’s surviving spouse for his or her lifetime. If there is no surviving spouse, it goes to the children, and if there are no living children, the property goes to the heirs. This means that you already own the property, and this is why everyone is calling you. Unfortunately, it has been my experience that lenders and homeowner’s associations will not quickly try to work it out with you because it is easier for them if you are on the hook. One action that you can take is called a “disclaimer.” By filling out a certain form and filing it with the clerk of court in your county, it will be as if you predeceased your mother as far as ownership of the property is concerned and the property will be owned by the other heirs in line. If no one wants to deal with the property, everyone just needs to file a disclaimer and then the lender and HOA will have to file a probate estate to get to the property. Just be careful if your mother’s estate has any other assets because they might be jeopardized by this action. Obviously, this is a complex issue and I recommend contacting an attorney.

To follow Gary Singer on Twitter, click here

When the bank won't foreclose and HOA fees pile up

2011-12-16T14:33:11Z

Q: I filed bankruptcy and abandoned a home in 2008. Since then the bank has not foreclosed and the homeowner’s association keeps sending me bills. What can I do? – Kimberly

A: While it may sound obvious, you own your home until you don’t anymore. By this I mean you can’t just walk away without being responsible to your association, the tax collector and your neighbors. You need to find someone to take the home from you. You may want to talk to your association to see if it will accept a deed in lieu of foreclosure. Some real estate investors may purchase your property at a steep discount to see if they can work out a deal with your lender. You can even rent the property and use the rental proceeds to pay back the HOA. The worst course is just to continue to do nothing because you are personally liable to the HOA for the dues that keep accruing.

Q: I signed a real estate contract to sell my house. The same evening I had a change of heart and decided not to sell. This is an executed contract. What happens now? – Maryanne

A: When you enter into a legally binding contract, the only outs you have, which lawyers call “contingencies,” are ones that are agreed to in the contract. You will need to carefully review your contract to see if you have any right to cancel. Be sure to look for certain opportunities to cancel the contract if the buyer does not do certain things, like get a loan approval from his or her bank to you by a certain date. If you cannot cancel, you are obligated to sell the home. If you do not do so, the buyer can sue you for money damages, or even possibly for “specific performance,” in which he or she asks the court to force you to sell him the home. In the future, do not sign any contract until you are sure that you want to go forward and have read and understood the contract and its repercussions fully.

Q: Some time ago, I read an article saying that after three years of non-payment, a mortgage can be declared invalid. Is this true? – Wilda

A: No. I think what you are referring to is the “statute of limitations.” A statute of limitations is a law that limits the amount of time that you may bring a lawsuit after a certain event happening. Every state has different rules regarding this for different events. In Florida, a mortgage forms a valid lien on a property for five years after the expiration date written in the mortgage. If no date is listed, then it’s valid for 20 years from its inception. The statute of limitation on a promissory note is five years from the date of the last payment. When a statute of limitation passes, your creditor can no longer sue you for that item. In this case, the bank could not foreclose, but you can’t sell the house without coming to an agreement with the bank.

To follow Gary Singer on Twitter, click here.