attorney could keep you in the house (and the money that saves you). Whether or not you use an attorney, however, you should always show up for your court dates.
The key to the stay-without-pay maneuver is saving every penny you can, so that when the time comes to move, you have a stash of cash to move with you.
We’ve seen homeowners save money during the redemption period and then hold an auction, garage sale, or estate sale and pocket thousands of dollars to make a fresh start. It’s certainly a more attractive option than getting evicted without a penny in your pocket and having the sheriff haul your stuff out to the curb where passersby can help themselves to it. (For additional details about this strategy, check out Chapter 13.)
Abandoning Ship Altogether
Some days, you may just feel like loading all your stuff into a moving van and driving away, leaving the house and all your troubles behind. Is that really a viable option? Sure, it is. Nobody can keep you living in your home. The trou- ble is that leaving may damage your credit and make it tougher for you to obtain loan approval later.
In the following sections, we reveal various ways to leave your home and discuss the pros and cons of each approach.
If you have equity built up in the house, simply walking away is never a good idea. Selling the property, refinancing, or exercising one of the other options discussed in this chapter enables you to cash out at least a portion of that equity rather than simply giving it to someone else.
Giving a deed in lieu of foreclosure
Your bank may agree to let you off the hook by handing over a deed in lieu of foreclosure.Ideally, you sign the house over to the bank, hand them the keys, and hit the road. The bank can then sell the house to recoup some or all of the remaining balance on your mortgage and you walk away without having a foreclosure posted to your credit history.
You have to be careful, though, so you don’t end up giving the bank the power to pursue you later with a deficiency judgment— a ruling that allows the bank to sue you for the balance of the loan that the sale proceeds did not cover. Have your attorney draft an agreement that allows you to walk away without looking back. The agreement should state that the bank can use only the house to recoup its money.
Your bank may even offer you a small amount of cash to sign the agreement, and if you couple it with the stay-and-don’t-pay strategy (see “Living in the home for free during redemption,” earlier in this chapter), you may be able to sock away a good chunk of change. Keep in mind, however, that the longer you stay without paying, the less money the bank may be willing to give you for moving on.
Gifting the house (and your problems) to an investor
You may be able to shake yourself loose from that monkey on your back by deeding your home over to an investor. The investor may be in a better
position to negotiate a short sale (see “Selling your lender short with a short sale” earlier in this chapter), to make the deal worthwhile to himself while providing you with a little cash to move on.
If you have little or no equity in the property, giving the property to an investor by signing a quit claim deed may be your best option. Again, you should con- sult with an attorney to make absolutely sure that your rights are protected and the bank cannot pursue you later for any losses it suffers.
Taking a hike . . . and leaving the house keys behind
If you’re fed up with the foreclosure, don’t care about how it’s going to affect your credit history, and have little or no equity in the property, walking out on it is always an option. Simply pack your bags before eviction day rolls around and move on to your new life.
Is this a viable option for you? Well, it may be. The following list describes the conditions that may make this option worth considering:
You have little, no, or negative equity in the property.Why throw good money after bad by trying to fix up the house and place it on the market, if you’re not going to get anything out of it?
Your house would be more costly to maintain and sell than it would be just to move.
You don’t have enough time to execute a more attractive option dis- cussed in this chapter.
You have a family you want to save from the embarrassment of a forced eviction.
What’s the worst that can happen? Surprisingly, nothing terrible is likely to happen if you simply abandon ship:
Defaulting on the mortgage loan is going to damage your credit,but that’s going to happen if you lose your home in foreclosure anyway.
The bank can obtain a deficiency judgment against youif the proceeds from the sale of your home do not fully cover the remaining balance on your loans. But again, this could happen if your home is sold at auction.
Junior lien holders may sue you on the note for the entire debt.Instead of following through on their secured position, they may choose to aban- don it and pursue full payment of the debt.
Time your move to reap the greatest benefits. If your state has a six-month redemption period, for example, stay in the home for 5 months and 29 days rent-free, save as much money as you can, and then move out. (See “Living in the home for free during redemption,” earlier in this chapter, for details.)
Doing Nothing: The Lazy Man’s Guide to Foreclosure Self-Defense
The absolute worst option is to do nothing. You simply continue on the same path you were on when you received the eviction notice. Your household doesn’t earn any more money, spend any less, or try to work out a deal with the bank, and you allow the wheels of justice to roll over you and your family.
If you’re single and you really don’t care, this may be the option of choice.
You wouldn’t be the first person to choose this option, and you certainly would not be the last. But if you have kids or others who depend on you to put a roof over their heads and food in their bellies, this is really no option to consider. Eventually, your house is going to be sold at auction and if you don’t leave by the end of the redemption period, you, your family, and your belongings will be moved out of the house for you.
The very fact that you’re reading this book proves you’re not really serious about this option. This book lays out your viable options and helps you develop a plan, so don’t give up!