Can You Keep Your Home after a Short Sale?

By Andrew J Thompson

One of the requirements for any short sale is that the property must be owner occupied.   Obviously, this is a requirement imposed upon the seller.  Another requirement is that the buyer must not be a “related party”.  This means a spouse, ex-spouse, parent, child, sibling, or possibly a partner, employer, landlord, or even a friend. The lender has great latitude in determining who fits the definition of a related party.

OK, so let’s say you’re living in a home you bought for $250,000 several years ago.  The market has reduced the value of the home to around $175,000 today, you’ve fallen behind on your mortgage, and the bank says you now owe them around $325,000.  Regardless of income, a loan modification probably doesn’t make sense at this point.

But you could reasonably make payments on what the house is worth today, and have faithfully tried to work with the bank ever since you fell behind.   The house is very attractive at the price to a third party buyer-investor.  You don’t know who this is, but chances are good your realtor will know what the buyer is looking as much as he/she knows your situation, and they may well be looking for a good renter – and the best renter might just happen to be you.

Is this plausible?  Basically it depends on the underwriting requirements of the lender.  If they will allow it, or have no means of prohibiting it, then yes, it could be plausible.  The problem is they have to approve the short sale, and if they feel like they will get a little less than they could through another form of sale, they are not likely to approve it – or it could take a very long time to get approval.

But if it takes a long time – so what?  What do you lose when this happens?  Probably not very much, if anything.  It just means additional months you are living in your own home and that you cannot make payments while you do.

The scenario is definitely one worth exploring if your hope for a loan modification is minimal, and if it seems your potential for recourse against the lender – as in most cases – is minimal.

Our firm has helped dozens of homeowners in foreclosure situations figure out ways to save heir homes.  If you think there may be a way we can help you, please call us at (317) 564-4976 for a free consultation.

Protection from a Sheriff Sale

By Andrew J Thompson

The most important thing you can do to protect yourself from losing your home in a Sheriff Sale is to be pro-active in presenting your legal defense at every step of the foreclosure process.  If you have tried to work with your bank alone, however, without the help of an attorney, it’s likely you’ve fallen short of protecting yourself in the best way you can.

If you have an attorney, who defends your rights on every point of contention, it is unlikely a court will decide you have slept on your rights, or failed in your efforts to meet your obligations (if in fact you have tried to meet them), and allow a Sheriff Sale to proceed.  On the other hand, if you wait until a Sheriff Sale has occurred or is about to, before having an attorney do anything on your behalf, the court is very likely to conclude you have had plenty of opportunity, and never shown the court you truly would do what you could to keep your home.

If you have fallen behind on a mortgage, there are things an attorney can do for you at each stage of the process:

  1. BEFORE A FORECLOSURE ACTION IS FILED: It’s wise to engage an attorney as soon as you reach a point where you cannot deal with the bank and get a sound resolution to your problem.  This usually occurs the first time you have trouble applying for a loan modification.  The banks are not good at explaining why there is a hang up in the process, and you may have some options or defenses to their claims against you for an arrearage, that can only be adequately presented if you start when they arise.
  2. AFTER RECEIVING A SUMMONS: Within 20 days after receiving a Summons, you should consult with and engage a lawyer.  This is the point at which the attorney can typically do the most to help you.  Why?  It is the one opportunity you have to deny the bank’s allegations.  But more important even than that are two critical steps in the process you can only engage within 20-60 days of receiving the summons: 1) the opportunity to file a counterclaim against the bank for what it may have done wrong, and 2) scheduling a settlement conference to seek a foreclosure prevention agreement.
  3. UPON A MOTION FOR SUMMARY JUDGMENT BY THE BANK: If the bank seeks summary judgment, and it usually does at some point, it is trying to avoid the expense and risk of going to trial by getting the judge to rule in its favor on the paper filed with the court, rather than evidence that could be presented at trial.  A skilled attorney can help you avoid summary judgment by pointing out factual issues that need to be addressed before the bank’s claim warrants a judgment in its favor.  If you prevail at this juncture, there is a very good chance the bank will never take a judgment against you and you will have the opportunity to negotiate a settlement that will work for you. (You may have to tender payments to the court to show good faith on your part in the meantime, however.)
  4. AFTER FORECLOSURE OR DEFAULT JUDGMENT IS TAKEN: This is a point when fast action is critical.  If you get something done before a Sheriff Sale is scheduled, you may never face that prospect.  But your options have been narrowed considerably by now and you have to think much more tactically with your attorney’s help.
  5. ONCE A SHERIFF SALE IS SCHEDULED: Like the preceding step, but much more obviously, this is a point when you need to act.  Your attorney needs to leverage his ability to slow down or “stay” the process and get the bank to consider a settlement that doesn’t end up in it taking back a property it probably doesn’t want.
  6. POST SALE, BUT BEFORE AN EVICTION: Even at this late stage, we have seen homeowners keep their homes indefinitely by showing some good faith and using their attorney to plead their case before the court.  You can save your home at any point in the process, but it gets tougher with each marker the bank passes on the road to taking possession of your home.

Take advantage of the resources you have.  Your attorney can be the best help you find in the process of avoiding the loss of your home through foreclosure.

Andrew J Thompson is an attorney with 22 years experience in business, family and real estate law, practicing in Indianapolis, IN.  You may reach his firm, the Thompson Law Office, by calling (317) 564-4976 to schedule a free consultation.