In my role helping people with short sales and as the developer of the Mortgage Relief Formula home study course, I talk to people who owe more than their home is worth and can’t afford their mortgage payment.
A lot of the houses people discuss with me are in the $200K range, but many are well over a million dollars.
I have clients with $1 million or $1.5 million homes who are in the difficult position of figuring out what to do.
The other night we had a conference call with one of my colleagues who has done hundreds of nine-day home sales, allowing him to sell his house from start to finish in nine days, even when there are apparently “no buyers.” We had a few people on the call who have homes over $1 million. Many have nothing but the house, which is a liability. But some people have assets such as paid for homes and shares in companies.
The problem with these people is that they often have a second mortgage and have assets. As I’ve explained, people with high-end homes and some assets to protect have special problems.
If you have assets, lenders can file for judicial foreclosure even in states like California, which typically follow the non-judicial deed of trust route of foreclosure. In judicial foreclosure, lenders can obtain a judgment that they can enforce against your other assets. Although trust sales are the most common, we will increasingly see lenders go to court against borrowers, even years later.
Second mortgages present a particular problem for homeowners with higher prices.
Many times the proceeds from the short sale will be insufficient to pay your first mortgage, let alone your second.
The second mortgage lender may accept the partial payment as a short sale, but may refuse to release you from the possibility of it going after your assets in the future. The statute of limitations for this type of thing can be four or five years, depending on your state.
The best way to protect yourself is to do a short sale through a trained broker, or learn what they are doing before you start talking to your lender. You can then negotiate a release so the lender doesn’t come after you later.
Avoiding foreclosure and negotiating a short sale for the most expensive home is increasingly critical. It can affect your financial future for years to come.