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Actual consequences of foreclosure

Discussion in 'Real Estate' started by Atlanta Bo, May 16, 2007.

  1. Mango

    Mango SoWal Insider

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    Shelly, quite a few attornies who've been around the block a few times and or worked for one, specialize in both bankruptcy and real estate.
    Someone looking for advice would be wise to seek out one who does.
     
  2. OnMackBayou

    OnMackBayou Beach Lover

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    I own a company that does asset investigations/recovery work for banks and attorneys. Much of what we do involves cases pre and post foreclosure.

    It all depends on the bank. If the foreclosure does not clear the balance, many will pursue a deficiency judgment. If they are successful, you not only lose your property but you have to face the prospects of someone trying to recover the judgment.

    Also, if there is a shortfall, they will most likely report that amount as income to the IRS, and you will owe taxes on it.

    From my experience, those that come out the best are those who are highly involved in working with the bank towards a solution. Generally, those that fare the worst are those that let this happen without getting involved.
     
  3. SHELLY

    SHELLY SoWal Insider

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    I think the the banks and lawyers are used to working with folks who really don't have the money or the means to pay the mortgage. Although lately they are seeing an increasing abundance of these folks at the door, the RE frenzy has produced a whole new group of people who are experiencing buyer's remorse over "investment" properties that are now bleeding red ink. Many of these "investors" have the means to keep paying the mortgage and carrying costs, but it will mean cutting back in other areas of their lifestyle. They don't want to work towards a solution...they just want it gone. They're discovering that a condo is not just like a few shares of stock that can disappear with a click of the mouse.

    How can a banker work with that? :idontno:


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    Last edited: May 18, 2007
  4. OnMackBayou

    OnMackBayou Beach Lover

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    Believe me, I understand the psychology of those who are upside down and do not want to own up to their obligation. An investor or homeowner who wants it "gone" can try to sell, work with the bank, or ignore it. Those that are facing a loss can try to get some kind of break from the bank. Most banks will listen and cut some kind of deal.

    Owners who do not get involved face the consequences, regardless of how they feel about it. My experience is that those who push their cause come out better than those who don't.

    The impact to one's lifestyle will be determined by the size of the deficiency, and how that particular bank chooses to deal with it.
     
  5. sberry123

    sberry123 Beach Comber

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    How about the appraisers who appraised properties so high to allow such large mortgages? I have said this before, it is not only the inverstors who got greedy. :blink:
     
  6. Babyblue

    Babyblue Beach Fanatic

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    Foreclosure will put a big black mark on your credit report which will not only make it a bit more difficult to get a loan (since the Subprime industry is tanking), but also can affect job prospects, insurance rates, security clearances, etc.

    Additionally, the difference in the amount of money you owe on the home and how much the bank can sell it for may be counted as taxable income and can also come back as "Zombie Debt" to haunt you further down the road if some debt buying agency like Asset Acceptance Capital scoops it up at pennies on the dollar and comes knocking for their money years down the line.

    .[/QUOTE]

    Actually if someone files for BK they are a better credit risk because they owe nothing. If they go 7. 13 a little tricky. :yikes:
     
  7. Babyblue

    Babyblue Beach Fanatic

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    Watch their TV show on Sunday night.
     
  8. SHELLY

    SHELLY SoWal Insider

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    The new bankruptcy laws made it much more difficult to file for Chap 7...if you make above the median income in Florida (just south of $36K for a single and $60K for a family of 4) you'll be put on a payback schedule under Chapter 13.


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  9. Babyblue

    Babyblue Beach Fanatic

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    True, but how many Floridians bought in the RE Frenzy? Most docs I see they are out of towners.
     
  10. SHELLY

    SHELLY SoWal Insider

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    ....especially if you are having trouble falling asleep. Their monotone droning is serious competition for the makers of Lunesta?..:sleeping:



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  11. SHELLY

    SHELLY SoWal Insider

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    Same rules apply for Chap 7 "means test," but using their home state's median income.

    <BTW, more than 1 or 2 Floridians got caught up in the frenzy too>
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    Last edited: May 19, 2007
  12. Babyblue

    Babyblue Beach Fanatic

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  13. SHELLY

    SHELLY SoWal Insider

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    Last edited: May 19, 2007
  14. Babyblue

    Babyblue Beach Fanatic

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    Ah, but the equity is protected by Florida Constitution.
     
  15. SHELLY

    SHELLY SoWal Insider

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    What equity?? :confused:

    Most of those now heading into foreclosure have "harvested out the equity;" HELOCed it to kingdom come with overblown appraisals; or did an 80/20 with Zeeero down.


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  16. Babyblue

    Babyblue Beach Fanatic

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    What foreclosures?
     
  17. DuneAHH

    DuneAHH Beach Fanatic

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