When a property is sold for an amount that is less than it is worth or less than the balance owed to the bank (with the approval of the lender), it is referred to as a short sale. The funds acquired during this sale are given to the mortgage holder and applied to the balance you owe. Though short sales are often associated with foreclosure, it is possible to sell your home in this manner without a foreclosure being initiated. Learning more about this type of transaction along with reasons to consider a

Divorce

A divorce is one of the most expensive financial transactions a person can expect to go through in his or her lifetime. Not only do you have to navigate the emotions associated with ending a marriage or establishing custody of children, you must also figure out a way to divide marital property. When a couple jointly owns a home and neither wants to surrender their interest to the other party, selling may become the only reasonable option. A short sale is a way to sell your property, quickly satisfying both parties and resolving one of the most complicated aspects of marital asset division.

Emergency Move

The average person in the United States can expect to move approximately 11 times throughout his or her lifetime. It is not unusual for a person of any age to need to move for an emergency reason that is not necessarily tied to finances. As the number of senior citizens throughout the country increases, many people find themselves needing to provide sudden care for aging loved ones. A prolonged visit could quickly turn into a permanent arrangement, and a short sale can benefit a person who needs to sell a home quickly so that he or she can make a relocation official.

Financial Trouble

Even though you might not be facing foreclosure, it is possible to find yourself in a difficult financial situation that your existing mortgage makes worse. Losing a job, being transferred to a less lucrative position, or another financial hardship could all make a short sale a better option for you than a traditional property sale. This is especially true if you are having problems keeping up with homeowners association fees, the property value in your area is stagnant or dropping, and you do not believe you will be able to stay current on your mortgage payments for much longer.

Talk to an Attorney

Deciding whether or not a short sale is the best option for you is something that you should do with the assistance of an experienced short sale attorney. An attorney can review all of your available options and give you realistic advice regarding whether negotiating with your bank or selling your home will provide the long-term relief you need. The attorneys at Resnick Law P.C. understand how stressful this process is and we work on your behalf to help alleviate your burden. Contact us today at (248) 642-5400 to schedule an initial consultation so that we can begin providing you with the help that you deserve.

(image courtesy of Max Sandelin)

Homeowners who live in a housing development are usually members of a Homeowners’ Association, or an HOA. Being part of an HOA requires the homeowner to abide by certain rules regarding the care of the property and pay dues and fees to the HOA. In return, the homeowner receives communal benefits. In some situations, HOAs can levy fines against homeowners in addition to the monthly or annual fees that the homeowner owes. If the homeowner falls behind on the payments due to the HOA, the homeowner may be surprised to learn that the HOA is filing for foreclosure.

HOAs have the power to file liens when a homeowner has not paid the required dues or fines, and once this lien is filed, it opens the way for the HOA to file a foreclosure action. The exact circumstances under which an HOA can file a lien against a homeowner’s property and eventually proceed to foreclosure is outlined in the HOA’s founding documents or master deed. Generally, when an HOA files a lien against a homeowner’s property, the HOA sends notice to the homeowner in order to give the homeowner an opportunity to contest the lien or pay off any dues in order to avoid foreclosure.

An HOA foreclosure is similar to a foreclosure by a lender on a mortgage. The HOA can either proceed by judicial or non-judicial foreclosure. With judicial foreclosure, the HOA files the foreclosure action in court, and the case goes through all the stages of litigation before a court approves of the foreclosure sale. In a non-judicial sale, the HOA can proceed to a foreclosure sale after notifying the homeowner of the pending sale. This is usually done through publication in a newspaper. This allows the homeowner time to pay the amount owed or contest the pending sale.

If the homeowner has any defenses to foreclosure, he or she can present this information in order to avoid the foreclosure. This can include evidence to show that the fees or dues assessed to the homeowner, which led to the foreclosure, were not assessed properly. Under both foreclosure approaches, the homeowner still has some time after the sale to pay the amount due and any additional costs, including any applicable attorney’s fees, in order to get back the property. This is known as a redemption period. The redemption period may be shorter if the home is deemed abandoned.

The HOA can file for foreclosure even if the homeowner is current on his or her mortgage payments and is not at risk from foreclosure by the bank that holds the mortgage. Once the HOA foreclosure is completed, the homeowner will still owe on any mortgage the homeowner did prior to the foreclosure. The HOA does not extinguish the homeowner’s obligations to other creditors. Selling the home while it still secures a primary mortgage can be difficult, unless the HOA is also the purchaser of the home at the foreclosure sale.

Contact Us for More Information

Whether you are facing foreclosure because of missed mortgage payments or because of unpaid HOA dues, you should contact an experienced foreclosure attorney as soon as possible. For more information and to find out if you have a valid defense to foreclosure on your home, call us at Resnick Law, P.C. in Bloomfield Hills and Detroit, Michigan. Our experienced attorneys can guide you through possible defenses and different alternatives to avoid foreclosure.

(image courtesy of Breno Assis)

The television advertisements offering older Americans an opportunity to get a reverse mortgage are well known. They describe offers and terms for homeowners, age 62 years or older, to convert the equity in their homes into money that they can use for their own needs and expenses. Not all reverse mortgages are a bad idea, but in some cases, homeowners who sign up for these mortgages may end up losing their homes.

A reverse mortgage is a kind of loan in which a homeowner uses his or her home equity as collateral to receive money for various uses. The home used for a reverse mortgage is generally the primary home of the person seeking to get the loan, and once the loan is in place, the homeowner is restricted from moving or selling the home without paying off the loan.

The money the homeowner receives can be distributed over a short period of time or in monthly payments. The homeowner does not make payments to the lender as with a traditional mortgage, but the homeowner is still responsible for making insurance payments and property taxes on the home.

The amount of money a person can receive in a reverse mortgage depends on a variety of factors. The age of the homeowner and any other co-owners of the home may be one factor. Once the last borrower of a reverse mortgage loan moves out of the home or passes away, the mortgage becomes due, and has to be repaid. This may mean an heir will have to pay the balance in order to keep the house, or alternatively, sell the house in order to pay the balance of the loan.

Reverse mortgages are non-recourse loans, which means that the lender can only get back an amount in repayment that is equal to the value of the home. Homeowners and their heirs cannot be sued for what would ordinarily be known as a deficiency in a regular mortgage foreclosure.

Homeowners who fail to make the necessary payments for insurance and property taxes can get into trouble and lose their homes in a tax sale. Homeowners may get confused and fail to make these payments because they assume that the lender will be making these payments on their behalf.

Homeowners have three days after signing up for a reverse mortgage to cancel the agreement without suffering adverse consequences. This is called a period of rescission. Before taking on a reverse mortgage, homeowners should always make sure they consult with an experienced financial advisor or attorney to ensure that the terms of their reverse mortgage are not adverse to their interests.

Contact an Experienced Attorney

If you want to pass on your home to your children, a reverse mortgage may be a risky move. If you are using the money from the reverse mortgage to pay down debts, there may be other ways available to you without resorting to the reverse mortgage. Before you sign up for a reverse mortgage, call us to speak to our experienced estate planning attorneys, at Resnick Law, P.C., in Bloomfield Hills and Detroit, Michigan for a consultation.

(image courtesy of Rowan Heuvel)

Although it is sometimes difficult to do so, it is possible for a person who has been through foreclosure to buy a house after the foreclosure is behind him or her. A person who wants to buy a home after foreclosure should consider the reasons that led to the foreclosure before, whether it was from misconduct by the mortgage lender or a financial problem. Reviewing these reasons may help avoid foreclosure in the future.

Once a person goes through foreclosure, it is noted on his or her credit report. If there were missed payments before foreclosure, these will be noted on the credit report, as well. These notations may affect a person’s credit score and ability to get approved for another mortgage loan. A person buying a home after foreclosure is likely to be offered higher interest rates for loans than a person who has not, but this also depends on a person’s credit score.

Typically, homeowners also have to wait a certain number of years before applying for a loan to buy a home. If applying for a federal housing administration (FHA) loan, a three-year wait from the time the foreclosure is completed is required. Some lenders can overlook this waiting period, but this is likely to come with steep interest rates on the loan and other unfavorable terms. Military servicemen and others whose foreclosed loans were government-backed loans may have to satisfy other requirements before they are approved for other government-backed loans.

It is critical for a person seeking a mortgage loan to look into various lenders and research the terms they offer, especially to former homeowners who lost their homes to foreclosure. Shopping around for the best terms can help save money in the long run. In addition to considering the financial terms offered by a prospective lender, the person seeking the loan should investigate the loan modification options available to borrowers.

The lender may need to be convinced that a person who has previously gone through foreclosure will not default on payments as before. This can be done in various ways, including remaining current on all other bills. Saving a down payment to purchase the home will also help convince the lender that you are likely to keep up with the payments.

A person who lost a home through foreclosure should ensure that he or she does not lie about the foreclosure or try to hide it on loan application documents. A lender who does its due diligence in checking the financial status of the prospective borrower will almost always catch misrepresentation by a borrower, and it will mean that the lender does not approve the loan.

Contact an Experienced Attorney

If you are going through a financial hardship and are facing foreclosure, you need to contact an experienced attorney as soon as possible. For more information and to find out if you have a valid defense to foreclosure on your home, call us at Resnick Law, P.C., in Bloomfield Hills and Detroit, Michigan. Our experienced attorneys can guide you through possible defenses and different alternatives to avoid foreclosure. Additionally, we can advise you if filing for and bankruptcy is in your best interest.

(image courtesy of Valentine Locatelli)

A foreclosure may not be the end of a homeowner’s financial problems if the homeowner has multiple loans secured by the home. These additional loans are generally known as junior liens, and they can take the form of second mortgages or home improvement loans. The lenders of these loans are usually behind the original mortgage lender in terms of getting paid when the house sells. This could leave the homeowner personally liable for the junior loans.

If the original lender, the senior lien holder, sells the home in foreclosure, the income from the sale is used to first settle the senior lien holder’s loan. If there are any additional funds left over, they can be applied to any junior loans. The junior lien holders can make a claim on the surplus from the sale of the home, but have to prove the validity of their claims. If the money only partially covers the balance of the loan, the junior lien holder can sue the homeowner for the balance.

This can also be the same outcome in a short sale or deed in lieu of foreclosure. However, in these situations, there is an opportunity for the homeowner to negotiate with all the lien holders in order avoid personal responsibility for a deficiency on all loans. These negotiations should take place before the sale takes place, and all lenders should agree not to seek deficiencies from the homeowner. This may work better if all the loans were provided by the same lender.

Homeowners should note that the junior lienholder who has an interest in the property can also foreclose on the home. If a junior lien holder sells the property, the senior lien holder still has an interest in the property, even if it is transferred to a new owner. Additionally, any surplus from a foreclosure by a junior lien holder does not necessarily go to the senior lien holder, and instead goes to other junior creditors or to the homeowner.

Following foreclosure by a junior lien holder, the original lender can still pursue the balance of the mortgage from the homeowner who took out the loan. The obligation to pay on the loan is not transferred to the new homeowner. However, the new homeowner does not own the property free and clear, and the senior lien holder’s lien remains with the property until the debt is discharged by payment or through bankruptcy.

If there are other creditors seeking to get paid, the homeowner who loses a home to foreclosure and faces the prospect of a deficiency judgement should consider filing for bankruptcy. Bankruptcy would allow the homeowner to erase all the debt, including junior liens, and start fresh even though it may negatively affect the homeowner’s credit.

Contact an Experience Attorney

If you are going through foreclosure and have multiple loans against the property being foreclosed, call us at Resnick Law, P.C., in Bloomfield Hills and Detroit, Michigan. Our experienced foreclosure attorneys can help you navigate the process and negotiate where possible to try and help you avoid deficiency judgments.

(image courtesy of Nathan Fertig)

When a person acquires real estate under certain conditions, and there may be other people who can possibly lay claim to that property,

The issue of filing a quiet title action can arise when the property at issue is purchased at a tax sale. The title deed issued as part of a tax sale may be a quit claim deed, where the purchaser essentially takes the risk that the title can be challenged by others with a claim to the property. When a seller sells land with a quit claim deed, the seller transfers whatever ownership the seller has to the purchaser, which may be a bad title.

Another reason to file for quiet title is to clear title to property that has been acquired through adverse possession. Adverse possession refers to the process by which a person gets ownership over land by exercising actual, non-permissive, exclusive, adverse, continuous, open, and notorious use of the land for a long period of time. A person who obtains ownership in this way may file quiet title to solidify his or her claim of ownership over the land after the required number of years to establish adverse possession.

Filing the quiet title action may be the only way to get clear title and be able to sell the property later on without any problems. Diligent buyers will always do a title search before purchasing a property. If the title is clouded or uncertain, then the buyer is not likely to spend money to inherit a problem. If the buyer is purchasing the property using a mortgage loan, the lender is not likely to approve the sale with less than clear title.

A quiet title action is filed against all people with a claim to the title over the real estate at the same time. Once an action for quiet title is filed, notice has to be given to all other people who may have a claim to the property to give them the opportunity to challenge the plaintiff’s claim. The person filing the quiet title action must be able to show that he or she has a superior claim to the property in order to prevail and get clear title.

Once a court grants the plaintiff clear title to the property, it should be legally sufficient to transfer the title, but it may still raise some questions with future buyers.

Contact Us for Legal Assistance

It can be quite difficult to sell real estate when you do not have clear title to the property. You may be able to get clear title by filing a quiet title action. For a consultation, contact Resnick Law, P.C., to speak to an experienced real estate and zoning attorney in Bloomfield Hills and Detroit, Michigan.

(image courtesy of Christopher Harris)

There are several steps that homeowners can take in an attempt to avoid foreclosure and keep their homes. Some of these steps or programs can be temporary fixes, while others are more permanent and can work to restructure the terms of the mortgage loan in order to make the payments more affordable for the homeowner. Temporary approaches focus on helping a homeowner who is experiencing temporary hardship avoid foreclosure. One temporary approach for a homeowner to avoid foreclosure is to apply for forbearance.

Usually, when a homeowner misses several months of mortgage payments without a prior agreement with the mortgage lender, the lender may be able to start foreclosure proceedings. Forbearance is a process through which a homeowner and the mortgage lender enter into an agreement that the homeowner will be allowed to miss monthly mortgage payments or to make lower payments for a period of time. A forbearance agreement assists the homeowner during a short period of time, usually up to six months, during which the homeowner is experiencing an unexpected financial problem.

Forbearance does not mean the missed or lowered payments are forgiven at the end of the forbearance period. Under a typical forbearance agreement, the homeowner agrees to make up the difference between the regular and lowered payments and any missed payments at the end of the forbearance period. These missed payments can also sometimes be absorbed into the overall loan owed, which can increase the monthly payments the homeowner owes after the forbearance period ends.

While forbearance seems like a good way to relieve the financial pressure of making on time mortgage payments while going through some tough times, it is not a good solution if the tough times are more long term. If the homeowner suffers a catastrophic injury and can no longer work to earn the amount of monthly income it would take to keep the home, the homeowner should pursue a different solution other than forbearance. However, if the homeowner is fired, and is in a field of work in which he or she can find another job in a few months, then applying for forbearance may be a good solution.

Mortgage lenders do not have to agree to forbearance for a homeowner, even one with a proven financial need. In some cases, whether or not forbearance is granted depends on the homeowner’s past payment history. The lender may offer a range of other loss mitigation options for a homeowner to choose from if forbearance is off the table. Before accepting any offers, the homeowner should always seek independent advice on the benefits of applying for a particular loss mitigation program in order to avoid getting into further trouble and then losing his or her home.

Contact Us for Legal Assistance

If you are experiencing financial hardship and would like to figure out the best way to handle your finances, call us at Resnick Law, P.C., in Bloomfield Hills and Detroit, Michigan. Our experienced attorneys can help you identify the options you have in terms of handling your debt and hopefully avoid foreclosure.

(image courtesy of Jesse Roberts)

1. Rising Rates

Last December, the Federal Reserve raised interest rates for only the second time since 2006 and many economists anticipate at least 2-3 more rate hikes this year. Rate hikes will cause mortgage rates to rise, potentially making it more difficult for prospective homebuyers to be able to afford the home of their dreams. (Rates have, in fact, already started creeping up.) But Redfin Corp. Chief Economist Nela Richardson says don’t worry too much about this trend. “We expect mortgage interest rates to increase, but to no higher than 4.3 percent on the 30-year fixed rate.” That’s still a great deal compared to historical norms.

2. More Credit

Richardson points out that although rates may rise, mortgage credit will likely be more widely available due to slightly looser lending standards. She notes that the Federal Housing Administration will likely lower fees it charges first-time homebuyers, a continuation of a trend begun in the Obama administration, under which it lowered fees in 2015.

In addition, starting in 2017, government-owned mortgage companies Fannie Mae and Freddie Mac will begin backing larger mortgages for the first time in more than 10 years, making it easier for buyers in expensive markets to finance their purchases.

3. More New Homes

Despite the most recent data on new home construction showing builders pulled back on new projects at the end of 2016, the overall trend in home construction is clearly positive, with the average annual rate of new groundbreakings reaching more than 1.17 million in 2016, up about 5 percent from 1.108 million in 2015. Economists expect this to continue in 2017, as home builders are encouraged by higher wages, looser credit and increased demand from buyers.

4. Medium-sized Cities on the Rise

One of the dominant stories of the current economic recovery is that top-tier economic cities like New York, Seattle, and San Francisco have seen property values rise as workers flock to these locations to take advantage of high-paying jobs.

Younger folks are finding themselves attracted to medium-sized cities, as well as cities like Detroit that are going through a development renaissance. Expect the trend to continue in 2017.

5. Foreign Buyers Aren’t Going Away

One trend that is helping drive prices beyond the realm of affordability in places like New York and Los Angeles is an influx of foreign buyers of U.S. real estate. “U.S. and Europe continue to attract growing amounts of foreign capital, especially from Asian investors,” writes Scott Brown, global head of real estate at Barings Real Estate Advisers.

This has only increased of late, fueled in particular by buyers from China who are looking for safe places to store their wealth, away from the slowing economy of the homeland, where repressive financial policies make it difficult to earn decent returns on savings.

Naturally, for those who own a home, Homeowners Insurance is essential and designed to protect property, possessions and shield you from liability for accidents. Below is Resnick Law’s “Quick 7” question check-up to make sure you and your assets are properly insured:

     1. Your Risks Have Changed?

You may be paying for insurance you no longer need. On the other hand, you may need more coverage based on your current life. For example, do you have coverage for the current value of your home? Most homes in our area have gone up in value in recent years. (If something happens, insurance that is based on what you originally paid may fall short of what you need.

     2. Review Policy Exclusions

Many people with Homeowners Insurance are devastated when they discover their policy doesn’t cover their particular disaster. For example, hurricane coverage relates to damage from high winds, not high water. If you are flooded, without special flood insurance, you are not covered. (As many homeowners of Oakland County discovered in the summer flooding in 2014.)

     3. Analyze Your Deductible

If you’ve been in your home for awhile, you may be in a position to raise the cash to make common repairs. A well-stocked emergency fund may be a better place to put your money because higher deductibles mean lower insurance rates.

     4. Your Life Has Changed?

If you get married, divorced, have children or send the children out on their own — each of these life events may impact the insurance coverage you need.

     5. Do You Have More Stuff?

Most insurance policies provide some coverage for personal possessions. Take a look around your home and inventory everything you own. Good advice on several fronts, including if a disaster were to occur, but it may also reveal you need higher limits on those personal possessions. Some items, like cash, jewelry and firearms may not be covered at all.

     6. Consider Replacement Costs

Insuring for replacement cost varies from one company to the next. Most require you insure your property up to or at 80-100 percent of the replacement cost. To keep current with the requirement, you must look at the cost of rebuilding frequently. Remember, in the case of a major catastrophe, materials and labor costs will surge, adding to the expense of replacing.

     7. Learn About Open and Named Perils

Generally, your homeowner’s policy covers open perils. In other words, you’re covered for any reason not specifically “excluded” from the policy. On the other hand, named perils provide for specific situations such as fire, explosion, windstorm, theft, vandalism or others.

The time to learn about your insurance coverage is before you experience a disaster. One way to ensure you understand your insurance coverage is to get a check up each year. We are here to help you–ask your Resnick advisor to read through your declaration pages and make sure your assets are properly covered.

Net Operating Losses

For many investors, buying income-generating real estate isn’t too different from buying corporate bonds or stocks. But there is one major advantage: losses on rental properties can be deducted from taxable income.

Getting that provision into the tax code was a rocky road. In 1986, Congress passed a law that treated virtually all investments in rental real estate properties as passive investments (much like stocks or bonds).

This meant property owners could no longer deduct any operating losses on their properties from their taxable income. In the following years, property prices went into a tailspin. Legislators blamed the 1986 law in part for causing the Savings & Loan crisis by discouraging investment in real estate, according to a 1994 Chicago Tribune report. So they changed the rules again.

Since 1993, rental property owners can deduct operating losses on their properties from their taxable income, provided they spend at least half their working hours and at least 750 hours a year as a “real estate professional.”

Other Mechanisms of Tax Reduction

Depreciation is the most famous — and counterintuitive — way real estate investors can shrink their tax bill. The IRS treats real properties as assets that lose value over time, along with cars, desks and refrigerators.

Property owners can deduct a certain portion of a property’s value every year until that value reaches zero. For residential rental properties, the typical depreciation period is 27.5 years, according to the IRS website.

As useful as depreciation is to property owners, it is a gradual process and rarely generates a sudden sizeable loss.

Another way developers can lower their tax exposure is through cancellation of debt, or outstanding debt that has been forgiven after negotiations. Typically, this kind of debt forgiveness is treated as income on a tax bill, but current laws allow taxpayers to deduct this debt if it is tied to Chapter 11 bankruptcy or if the taxpayer is insolvent — meaning their debt is greater than the total market value of all assets

Developers have long used these strategies. After a recent article in The New York Times about Donald Trumps reported losses — $915,729,293 — on his tax forms in 1995, tax services firms sought to seize the moment by sending out email blasts advertising their tax reduction services.

One email from South Florida-based Property Tax Appeal Group, titled “Donald Trump Knows How to Avoid Taxes in Real Estate,” urged investors to file property tax appeals and “take advantage of what the law allows.”

“This is truly a win-win situation,” the email read.