I have a friend who is terminally ill and upside down on his home. Can he just walk away from his home? Would his estate be in jeopardy if he did that? What are his options? He was advised by a friend to do a short sale, but given his circumstances, I don’t think this is a good idea. He bought it for about $210,00 and now it’s worth about $175,00. He has only lived in it about 2 years.

–Kathy

First, my condolences to your friend. What an awful place to be and tough decision to have to make and worry about at a time when it should not even be a consideration.  I sent your question to a local law firm in Wilmington, Delaware–Ward & Taylor–and Jonathan Taylor responded with the following information:

“The lender could file a claim against his estate for any deficiency balance after the property is sold at a sheriff sale if there are not enough proceeds to pay the loan in full. Is he able to make the monthly mortgage payments or is the loan in arrears? If it is in arrears, he could approach the lender and explain his situation and see if the lender will take the deed to the property ‘in lieu of foreclosure.’ This will save the lender time and give them possession of the property sooner so they can re-sell it. If the loan is not in default, the lender will probably not entertain a deed in lieu of foreclosure, but given his circumstances, it is possible.”

He may want to consult a local real estate or estate attorney in your state of residence, and see what the options are, and even perhaps negotiate with the bank.

A short sale is always an option, but it is not an option that is as strong as it once was.  For a lender to accept a short sale, they are now more often imposing personal loans and notes on the remaining balance. They have insurance on the loan and sometimes that insurance is paying better than the short sale.  Another reason short sales are going out of vogue is that lenders are anticipating a recovery by the end of next summer. The foreclosure process typically takes 6-9 months to go from inception to REO sale at the other end. By then, the properties will fetch more at normal market sale than on a short sale. I am noticing a trend away from short sales success and more often failure.

I have been doing short sales for the last four years, and now the frequency is so high, even our MLS has added  an indicator on the listing as to whether a home is a short sale. I have had 100% success in getting them negotiated and closed, though after the last one, I am done with short sales.  It is too painful and frustrating for the seller, and the buyer is put in a precarious position as well with an uncertain future.

Unfortunately there is really no good answer, but the first thing your friend should do is reach out to an attorney, and follow that advice. No one would say fall behind in your mortgage, but sometimes that is what it take to get the lenders attention to begin negotiations.

Thanks for your question and I do hope your friend has a wonderful remainder of his life.

Maya Paveza is a REALTOR® for Coldwell Banker Preferred in Wilmington, Delaware and Southeastern Pennsylvania. She is also a founding member of Twitterqueens, Inc. Social Media Educators.

Are you interested in having a qualified REALTOR® answer your questions? Click through to Ask a REALTOR® now.

Are you a REALTOR® who would like who like to answer consumer questions? Click through to become an Ask a REALTOR® participant.

I have a friend who is terminally ill and upside down on his home. Can he just walk away from his home? Would his estate be in jeopardy if he did that? What are his options? He was advised by a friend to do a short sale, but given his circumstances, I don’t think this is a good idea. He bought it for about $210,00 and now it’s worth about $175,00. He has only lived in it about 2 years.

–Kathy

First, my condolences to your friend. What an awful place to be and tough decision to have to make and worry about at a time when it should not even be a consideration.  I sent your question to a local law firm in Wilmington, Delaware–Ward & Taylor–and Jonathan Taylor responded with the following information:

“The lender could file a claim against his estate for any deficiency balance after the property is sold at a sheriff sale if there are not enough proceeds to pay the loan in full. Is he able to make the monthly mortgage payments or is the loan in arrears? If it is in arrears, he could approach the lender and explain his situation and see if the lender will take the deed to the property ‘in lieu of foreclosure.’ This will save the lender time and give them possession of the property sooner so they can re-sell it. If the loan is not in default, the lender will probably not entertain a deed in lieu of foreclosure, but given his circumstances, it is possible.”

He may want to consult a local real estate or estate attorney in your state of residence, and see what the options are, and even perhaps negotiate with the bank.

A short sale is always an option, but it is not an option that is as strong as it once was.  For a lender to accept a short sale, they are now more often imposing personal loans and notes on the remaining balance. They have insurance on the loan and sometimes that insurance is paying better than the short sale.  Another reason short sales are going out of vogue is that lenders are anticipating a recovery by the end of next summer. The foreclosure process typically takes 6-9 months to go from inception to REO sale at the other end. By then, the properties will fetch more at normal market sale than on a short sale. I am noticing a trend away from short sales success and more often failure.

I have been doing short sales for the last four years, and now the frequency is so high, even our MLS has added  an indicator on the listing as to whether a home is a short sale. I have had 100% success in getting them negotiated and closed, though after the last one, I am done with short sales.  It is too painful and frustrating for the seller, and the buyer is put in a precarious position as well with an uncertain future.

Unfortunately there is really no good answer, but the first thing your friend should do is reach out to an attorney, and follow that advice. No one would say fall behind in your mortgage, but sometimes that is what it take to get the lenders attention to begin negotiations.

Thanks for your question and I do hope your friend has a wonderful remainder of his life.

Maya Paveza is a REALTOR® for Coldwell Banker Preferred in Wilmington, Delaware and Southeastern Pennsylvania. She is also a founding member of Twitterqueens, Inc. Social Media Educators.

Are you interested in having a qualified REALTOR® answer your questions? Click through to Ask a REALTOR® now.

Are you a REALTOR® who would like who like to answer consumer questions? Click through to become an Ask a REALTOR® participant.