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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (74573)	3/23/2007 11:24:16 AM
From: ChanceIs	Read Replies (2) \| Respond to of 306849

>>>lender would not take a hefty discount only that he start the foreclosure process as the borrower tries to sell the property.<<< A story from my personal experience: My only investment property was a condo I bought as my first "live in" property - Northern Virginia. In '89 (tail end of that great boom) I wanted to sell and move into a house. My sales agent found a buyer, but I had to hold a second. No problem - prices were rising - besides the buyer worked for the IRS - great job stability. The buyer defaulted however in early '92 having copped a ficticious (I am sure) personal injury (dropped a box of paper on foot) and got disability for life (at reduced salary and w/o any tax benefit to interest deduction). While humorous (and frustrating as a taxpayer) it doesn't matter - the buyer was in default. Having tried a "workout" for several months, I began forclosure in June '92 ($400 advertising in newspaper - required). They filed BK - stopping foreclosure. They claimed equity in the property - had to go to court to establish that there was none. (This is done so other creditors can get their fair shake of the total estate.) The administrator (forgot legal name) then freed up the property for foreclosure. I had to pay another $400 advertising and succeeded in foreclosing. Had to send attorney to bid on it. Since there was no equity and a first lien - there were no other bidders. I got title back. Then I had to evict. I had to go to court to get a writ of "unlawful detainer" - establishing that a specific individual was occupying the owners premisis w/o any legal reason for being there. This required scheduling a hearing. The buyer had to attend. The buyer claimed that her attorney had abandoned the case. This was true. The buyer's attorney had been previously disbarred and was subsequently disbarred again. In Virginia, detainer hearings are only held in Fridays. The scheduling hearing was early December. There was a backlog so they had to schedule it a few weeks out. In 1992 Christmas fell on a Friday - no court of course. New Years always falls on the same day as Christmas - Friday January 1, 1993 - no court. The court erred and posted the hearing in the wrong courtroom on the docket at the lobby of the courthouse. My attorney (a good guy) was in the wrong courtroom. By the time he figured things out, the case had been heard. The squatter (former buyer) was there. The backlog was by that time huge. The judge asked if the hearing should be Jan 22 or Jan 29. Of course it was set for Jan 29. My attorney got there and protested, but the judge said "tough" (the state always takes the side of the evictee). Jan 29th rolled around, and we got the writ. Then I had to schedule with the sheriff to throw the bum out. That took another month. The sheriff will not evict w/o a moving crew (which I had to hire) present at the time to set the belongings out on the medial strip. The state doesn't want the new owner to take an axe to them and throw them out the window - wouldn't be fair to the evictee. You are allowed to put them on the medial strip of the nearest highway - public land - under the sheriff's supervision. I has to attend the eviction. The sheriff knocked on the door and got yelled at. He took the snap strap off of his gun. I ran for cover. The bum then left peacefully having already moved all the belongings out. I then dismissed the moving crew, but had to pay an hour's minimum. My attorney stated that that was one of the worst foreclosures he had ever processed. Bottom line #1: 1) $6K in legal, advertising, moving and miscellaneous, 2) about 15 months post default, 3) Frustration out the wazoo. The above is a very true story. Bottom line #2: The banks have been through this a thousand times. Things can go very wrong, it takes a whole lot of time, and is expensive. The state will always give the homeowner every break possible under the legal system - and Hillary/Dodd are about to make that worse. Banks would have to be complete idiots not to begin foreclosure immediately. They can always schedule a foreclosure date further out in time if they felt they could negotiate effectively and productively with the owner (eg work out a short sale). Ancillary Thought: Given the "surge" in defaults, one can expect the foreclosure processing time at the courthouse to get quite lengthy. Reports of such have already been posted here. Hillary and Dodd are threatening more interference. Banks would have to be fools not to foreclose immediately due to the lengthening lines and potential interference. This would all work out to be "pent up supply," vice the "pent up demand" Robert Toll anticipated six months back.

To: John Vosilla who wrote (74573)	3/23/2007 12:42:13 PM
From: jpk1	Read Replies (2) \| Respond to of 306849

Actually it can end up in a nightmare situation for the borrower when they realize they owe income tax on any forgiveness of debt through a short sale. If the forgiveness of debt is minimal it probably is the best solution but when the amount is large you can put your self in a much worse situation. Nothing like the IRS telling you to come up with a quick $20000 or $30000 plus you would owe the state assuming they have income taxes. The only way to come out clean is to file a bankruptcy and let the bank foreclose.