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Michael Samuels, is a lawyer, realtor, and foreclosure expert. To achieve the best resolution in a foreclosure you need both real estate help and legal help. You need a realtor to convince the lender that it is in their best interest to work with you. You need a lawyer to (1) delay the foreclosure process, (2) make sure you get a complete, valid and enforceable release from liability, and (3) make sure that you don’t have to pay income tax on the loan forgiveness.
Each of the following options has a different effect on your credit and future liability.
1. Loan Modification. If your mortgage is government-insured, such as an FHA, FNMA or VA loan, you may be eligible for a HARP loan modification. In a loan modification your missed payments are added to the principal balance and you start fresh, frequently with a lower monthly payment. Your credit is not a factor in whether you get approved. You do need to show sufficient income to make the future payments.
2. Payment Plan. Some banks will agree to a payment plan to help you get current over a 3-6 month period.
3. Short Sale. In a short sale, the lender agrees to let you sell the property for less than what’s owed, release its mortgage, and grant you a release from liability. The lender needs to be convinced that the home is worth less than what’s owed and that you’re acting in good faith.
4. Deed-in-lieu. In a deed-in-lieu, you transfer the home to the lender in exchange for a release from liability.
5. Walk Away. You can leave the house and let the foreclosure go forward to sheriff’s sale. This is the worst choice. It does the most damage to your credit. Most importantly, the lender is likely to get a money judgment against you that will follow you forever, or until you file for bankruptcy.
Michael's Role as Realtor
As your realtor, Michael will work to convince the lender that your preferred option is in its financial interest. For a modification, we will help convince the lender that you will be able to afford the future payments. In a short sale, we will produce an appraisal to try to convince the lender that the home is worth less than what’s owed, list and sell the home, and convince the lender to accept the short sale purchase contract. With respect to a deed-in-lieu, we will seek to convince the lender that there’s no sense going through the time, expense and potential property deterioration of the foreclosure process, and that they should take the home back in exchange for a release of liability.
Michael's Role as Attorney
1. The Release: If you do a short sale or deed-in-lieu, Michael will negotiate a release of liability, and review the release to make sure it’s complete, valid and enforceable. A realtor is not qualified to do this; it is illegal for a realtor to give advice regarding the validity of a release.
2. Tax Consequences: A short sale or deed-in-lieu will result in you having to pay additional taxes unless steps are taken to avoid it. In other words, if the lender receives $50,000 less than what’s owed, and they grant a release, you may have to pay income tax on that $50,000. You need to take certain steps to avoid this tax liability–Michael will advise and guide you to legally avoid having to pay these taxes.
3. Filing an Answer: Each option is time-consuming; once a foreclosure is filed the clock is ticking toward a sheriff’s sale, which you want to avoid. Filing an Answer in the foreclosure court case will delay the sheriff’s sale for an additional 4-6 weeks. Without this additional time you may not be able to achieve your desired resolution before your home is sold at sheriff’s sale. Michael will file an Answer on your behalf and get you this additional time to live in your home and achieve your desired resolution.
Avoid the Scammers
You will receive letters from people offering to buy your house. Be careful, they are not looking out for your best interest; they are only seeking the cheapest deal they can get. They present several problems that can do you tremendous harm:
1. Short Sale: To convince the lender to allow you to sell the house for less than what’s owed, the lender will want to make sure that the home was placed on the market to see what it’s really worth. Without market exposure, the lender cannot be sure you sold it for fair market value. In all likelihood the lender will take a long time to review the offer, reject it, and the foreclosure will continue to proceed. You may run out of time and end up with a sheriff’s sale.
2. Answer: These buyers cannot file an Answer in the court case and buy you crucial additional time.
3. Release: They have no legal expertise to make sure that at the end of this process you get a full, enforceable release from future liability.
4. Taxes: They cannot give you the necessary guidance to avoid having to pay income tax on any discharge of debt the lender may give.
5. Fraud: Many of these “buyers” are scammers. They get the home under contract with no intent or ability to close on it themselves. They try to find an investor to whom they can flip the home in exchange for a fee. If they can’t find someone to flip it to, they cancel the contract with you and you’re stuck, with no time to avoid the sheriff’s sale.