Legal Question in Real Estate Law in California
Follow up to prior posts: OK - Sign Deed and roll dice with Short Sale. One final question: Being there are no leins filed as of yet and I don't believe that they will accept the short sale, would it be wise if we contacted them and offered a Deed in Lieu of Foreclosure? My thought would be that we would ask that chase forgive both 1st & 2nd (2nd is 18K), list it as paid-settled with credit bureau, and minimize number of lates reported to credit bureau (if any at all) and in return we would execute the Deed of Trust and give them the house without hassle? I have read that these are negotiable items in a DIL and that they would result in minimal reduction of my credit score? Is my understanding correct?
The alternative would be that they may have to do the non-judicial foreclosure and get a judgement that we would just file bankruptcy on at a later time.
Thank you again for your help.
What are your thoughts on this avenue and do you have any suggestions for accomplishing my goal of getting out of the house and payment with the least amount of damage to our financial lives?
I possibly have a way to leverage the mistakes made on the loan and make this a less painful situation?
I sincerely thank you for your help.
P.S. - I would like to add that this is not something that I ponder out of greed or malice. Here is our situation: 2 years ago we were very comfortable financially, so much so that we adopted 2 little girls (we now have 3), bought our dream house (smaller and less expensive than the other but has some acres to raise our family), and had about $50K saved (although no retirement funds left, we would work on this for the next 15 years or so).
Unfortunately, my wife hurt her back moving into the new house and was disabled for 1 yr 3 mos., had 3 surgeries, was on bed rest for months, in and out of hospital with staph infection, and heavily medicated the whole time. She lost her job, as a result, which was the primary income so we spent all of our savings to survive this difficult time. We had private disability insurance but they paid her for 9 days in the beginning and said that their doctors determined she wasn't disabled after that so we have an attorney fighting to get us that money but they will get 40% off the top when they win.
During this whole time we were paying about $1000 per month toward the second house (the one we are trying to figure out how to get out from under). This is with a renter paying a very good price for the house. When they moved, we realized that the rent had gone down and were couldn't afford the payments so we asked the bank to work with us and they said that they wouldn't even talk to us at all if we weren't late on the payments, so we stopped paying and got a realtor who got a cash offer and incereased it as per the request of the bank negotiator. Then the negotiator decided he wanted us to put in money because he saw that I had taken $20,000 cash advance from my credit card and had money in the bank. I explained that I did so because I was concerned that we weren't going to have enough money to pay our bills because my wife's new job pays half of what she was making and refused to contribute any of the borrowed money. To which he said he understood and had us prove it was borrowed. The negotiater then renigged on his initial agreement to process the Deeds in escrow and insisted that we complete them immediately and refused to even confirm that he would accept the short sale that we have on the table for the past 120 days. He did however promise that he would keep the file open while the buyer was in place to give us time to have an attorney review the deeds he had sent to us to sign. Earlier today, I had gotten enough feedback from you good folk at Lawguru to confirm that I should sign the deeds as you had suggested. Upon notifying my agent that we would execute them, she called me back about an hour later to inform me that the negotiator had in fact decided to close the case without notifying us and that we would have to re-submit everything which may result in the buyer walking away.
This negotiator is not acting in good faith and I don't trust them. They are dragging this out and are now very near the time of foreclosure and I don't believe they have any intention of accepting a short-sale which if I can't find a better way out, leaves us with a foreclosure on our record.
I just thought you deserved to know that you weren't just offering your advice for the purpose of maliciously stealing the banks money.
1 Answer from Attorneys
I really apologize, but we (the attorneys responding) do not see the original post you made, nor a name or any identifying information to connect this post to a prior post. I personally respond to a lot of posts in any given week, so I apologize if I do not recall your previous post and/or answers posted. As such, your question is really not worded in a way that it can be answered without knowing what you asked and the facts you provided previously.
That being said, if you can convince the bank to accept a Deed-In-Lieu, to forgive any balance owed and to report the account as settled then you will clearly be better off than a foreclosure. Is it realistic that they would do so? Probably not, especially where there are two loans, but you can certainly give it a try. You also need to speak with a CPA or Tax Attorney about the possible tax implications of a Deed-In-Lieu - there are two and you need to know if you will have a taxable event as a result of their acceptance of the deed and forgiveness of debt.
Can you use issues with the loan as leverage to obtain a better settlement - certainly, but they really need to be real issues on which the bank has exposure or liability, and in many cases the filing of a lawsuit alleging those violations may be necessary to have any real leverage with the bank.
*Due to the limitations of the LawGuru Forums, The Gibbs Law Firm, APC's (the "Firm") participation in responding to questions posted herein does not constitute legal advice, nor legal representation of the person or entity posting a question. No Attorney/Client relationship is or shall be construed to be created hereby. The information provided is general and requires that the poster obtain specific legal advice from an attorney. The poster shall not rely upon the information provided herein as legal advice nor as the basis for making any decisions of legal consequence. As required by 11 U.S.C. �528, we must now disclose that, "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. Assistance we provide with respect to Debt Relief may involve bankruptcy relief under the Bankruptcy Code."
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