Back in 1969 just a couple of years after I was born, a woman named Elisabeth Kübler-Ross wrote a book called On Death and Dying in which she described five stages of grief after studying the terminally ill. These stages of grief have been found to apply to other situations, and I personally have found them to serve me quite well when talking to homeowners, Realtors, and others about foreclosure.
The stages are:
- Denial
- Anger
- Bargaining
- Depression
- Acceptance
It is easy to understand how each of these can apply to the current real estate market and foreclosure situation. This is true both for homeowners as well as for anyone who depends on the real estate market to make a living.
For those doing business in this market, I suggest it is important that you learn to have some understanding for which stage your customer or partner may be in at the time. For example a homeowner that is currently in the anger stage may be better left with some comforting words and an offer to follow-up rather than a full-tilt sales pitch. And recognize that you shouldn't write that customer off, as they may soon move to bargaining or acceptance and be ready to get a deal done.
Still even with this knowledge don't expect it to be easy. Often you will find yourself dealing with two decision makers within the same family, or same office, who are in completely different stages. Often trying to speak to the needs of one will put you at odds with the other. Best strategy here is to look for common ground. Though perhaps if one is dealing with depression and the other anger, you should just run.
Hopefully, as this market continues to unfold, we can all find a bit more understanding for others that may be in different stages than ourselves. And, as importantly, be sure to take a little time to reflect on what stage you are in, and whether it is helping or hindering you from acheiving your goals.
Comments:
I know this situation first hand. I refi'd my property for the last time on April 23, 1992. That loan was an ARM with very unreasonable terms. My reset came 6 months later at 18+%! I held on as long as I could. I was a drywall contractor then and ran into a bad comedy of errors that finally tanked me and any real estate investing that I was attempting to get in to. I was a Blue Sheet subscriber then and heard about the stories of the "40 Thieves" ("Florida" comes to mind) Didn't have a clue on how to process the info from the Blue Sheet or how to proceed. Now I have MLS access and was an appraiser for 4 years. I did try to find a buyer for the property, without success. I wish that I knew about a short sale then. I would have done it to avoid the humiliation and blowing my credit and credibility to shreds. I wanted to bargin and just get this burden off of me. I used my home like an ATM machine hoping that my situation would turn for the better. I went bankrupt and on February 14, 1995, it was all over. I've accepted the fact, but still feel ashamed that I had failed. And I'm still angry, at myself.
Unfortunately, I find very few people get to number 5 and the home always gets foreclosed upon.
Most people who are in default believes there is nothing they can do but to stay as long as possible. Usually a short sale needs to be handled as soon as a default has been recorded, because time is your worst enemy. Every lender handles a short sale differently. A short sale may be used to salvage what's left of your credit and giving you another opportunity to purchase a home in a shorter period of time versus being foreclosed. The government has passed a debt relief act since 2007, which allows home owners who are upside down a chance to clear their debt on the home. I would advise the seller to consult with their CPA or professionals for income gains in a short sale. Although there are a few more options for a homeowner to stop the foreclosure process which i'll talk about another time.
I have a close friend who had to go through this just recently and I beleive that no one should ever go though that pain and humiliation.
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Acceptance occurs when the seller realizes that homes prices have fallen; that he or she will not get peak price of what is now six months or more ago; and that if he or she wants to sell the home, the asking price needs to be adjusted downward considerably.
Most people do not realize that they can stop foreclosure even if they stopped paying their mortgage. Many recent cases have been filed improperly and an experienced attorney can assist with the identification and filing of substantive and procedural defenses with the court and vigorously defend your case. Due to the lender's actions, omissions or other facts surrounding your case, you may be able to stop making mortgage payments and stay in your home while your attorney vigorously defends your property. This does not necessarily mean that you will not have to pay the loan back or completely Stop Foreclosure. It is possible to completely Stop Foreclosure if the bank or lender is in violation of the Florida Unfair Lending Act or other predatory lending practices. If the lender has committed such a violation, the entire principal and interest balance may be waived and the mortgage may be voided. This may not be relevant in your case. But, at the very least, a successful defense can do is buy you precious time to:
* Stay in your home
* Negotiate a work-out with the bank
* Sell your home for a fair price
* Refinance your home at a fair rate
* Continue to collect rent on the property
* Apply for a Court Ordered repayment plan
* File a Chapter 13 or 7 Bankruptcy
When home owners are faced with the reality of facing a potential foreclosure, many experience a state of paralysis. They don't know what to do. Selling the home may not be an option since the equity appears to have vanished. To fight foreclosure or not? That is the question. Clouding the answer is perhaps the biggest misconception, "Hiring an attorney is not a cost-effective option." If I can't afford to pay my mortgage, then how in the world can I afford to hire a competent attorney? And why should I, if I am upside down in my home? First of all, EVERYONE can and should hire an attorney to represent them in their foreclosure case. There are many competent attorneys who specialize in this area. Due to the growing number of these cases, many attorneys have become "experts" in this area. Due to the fact that most of these cases are very similar, many excellent attorneys have experienced staff and can offer extremely affordable payment arrangements. Most people don't know that once the foreclosure proceeding has started, the bank will not accept any future mortgage payments - doing so may adversely affect their ability to foreclose on your property. Furthermore, the bank pays any delinquent real estate taxes and the insurance on the property. In summation, once the bank files a foreclosure lawsuit, most of the homeowner's expenses are being paid by the bank (mortgage, taxes and insurance). However, as the legal owner of the house with full possession, you have all the rights associated with same including residing in your home, collecting rents on the property, etc. Imagine the "EQUITY" you can save / build, if you fight the foreclosure case for a year or more. The cost of qualified legal representation is a drop in the bucket compared to your typical home ownership overhead. Time is money and the real estate and financial markets are likely to turn around. The hiring of the right attorney will save you thousands of actual dollars, in addition to thousands in time value of money. Its really a no-brainer.
Respectfully,
Frederick A Neustein
http://StopForeclosureLawyer.com
Foreclosure can be so depressing. I have a friend who is worrying about her housing situation right now. There are some things you can do to avoid foreclosure: there is an article here about alternatives to foreclosure http://www.lawfirms.com/resources/real-estate/foreclosure/alternatives-f... and there's also info on the HUD site http://www.hud.gov/
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