Are you thinking about walking away because the math don’t add up anymore – Contemplating Strategic Default vs. Strategic Short Sale in Lakeland, Florida?
During the housing boom the lender thought it was a great business decision to provide you with a loan based on your financial situation and the value assessment of the lender’s appraiser so you could purchase your Lakeland FL home. In return you put up your house as your collateral and signed a promissory note – promising that you pay back the mortgage. More and more borrowers come to the same conclusion that it is their business decision to either strategically default or doing a strategic short sale.
While this decision is totally up to you, I’m not here to criticize or judge your action. I’m here to explain your options and hopefully convince you to look at Strategic Short Sale first. The lender is only looking at their bottom line and is less concerned with the hardship.
What is a Strategic Default?
A Strategic Default is basically walking away from your obligation to pay your mortgage because your home is underwater; hence the mortgage is more than the current market value of your home. This may work in Arizona, Alaska and other states because the lender cannot come after the borrowers other assets, since it is a non-recourse state. The State of Florida on the other hand, is a recourse state and the lender has the right to go after the deficiency judgment. Before you decide to walk away thinking you may be eligible for another loan through Fannie Mae in five years, think again! Fannie Mae recently announced a new waiting period of 7 years and start to crack down on borrowers who elect to strategically default.
Fannie Mae’s filing for a deficiency judgment is the next step it will take. The news release on June 23, 2010 said, “Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments”. Click here to read the whole news release! Not a good option in Florida
What is a Strategic Short Sale?
If you’d asked me a few months ago about a Strategic Short Sale, I would not have taken a short sale listing if there was not a hardship that could not have been supported by documents. The difference between a short sale and a strategic short sale is the borrower may financially be able to pay for the mortgage but is essentially making a business decision to unload the house.
The process of a strategic short sale is essentially the same as a short sale with a verifiable hardship. The amount of the balance you owe may be negotiated to a smaller amount on which the lenders ask you to sign a promissory note. Again, if it makes financial sense for the lender that their bottom line generates more money in a short sale than a foreclosure they will more likely approve the short sale.
I’m not an attorney or a tax advisor and therefore highly recommend anyone reading this article, contemplating Strategic Default and Strategic Short Sale to discuss options and ramifications with a real estate attorney and a Certified Public Accountant.
Foreclosure can be avoided through Short Sale! If you need to sell your home in Lakeland Florida as a short sale, hiring an experienced real estate agent who is knowledgeable on both sides of the transaction is basis for a successful closing.