What happens when there is no buyer for your property at ANY price because a literal buyer disaster has occurred in your neighborhood? In the past 2 years, mortgage crisis and real estate value meltdown notwithstanding, three events keep showing up in my Florida office:
1. Chinese Drywall homes where the family has to move out because they are sick and the house is inhospitable to not only the family but to all the mechanicals inside (wire, metal studs, appliances)
2. Loxahatchee (Acreage) Cancer Cluster where the rate of brain tumors in children is alarmingly high, making raising a young family (or any family) in that area life threatening
3. An Orlando community where they have discovered the land was used to train aircraft pilots and crew how to drop bombs, but the Air Force failed to remove the defective unexploded ordinance ("UXO").
If there is no buyer then even a short sale will not work because it takes at least 3 parties for a short sale to occur - the seller, the buyer and the seller's lender(s). See Short Sale Trilogy.
Each of the situations above are environmental in nature. Each has a cause. But that is about the end of the similarities. In the UXO situations the government is always to blame, but the remediation can take years and it may not be deemed so dangerous as to cause the government to effectively have taken the land and thus have to compensate the homeowners for their loss (meaning having the them move out, in the nature of a condemnation or "taking"). Mere temporary diminution of value may not be compensable.
The drywall debacle has a culprit - the drywall manufacturer. But this is a company in a foreign land and successfully collecting on a judgment against the manufacturer could be problematic. It is far easier to seek damages from the supplier or the contractor or both, but those parties may have been without knowledge of defective materials and in the case of the contractor, may not be in business anymore. Regardless, a lawsuit and the length of proceedings are not going to help a homeowner that had to obtain alternative housing and still pay the mortgage on the defective home. Is this a matter that the government should step into as providing a remedial lifeline to such homeowners? Thus far the government has made inquiries and investigations, but no financial help to such homeowners affected by this problem
Lastly, the cancer cluster is now recognized, but who is to blame is anyone's guess. Is it the water, the soil, man made contaminants, naturally occurring contaminants, external causes? No one is likely to know for years, if ever, where the blame should be fixed - or even if there is anything to really fix a blame for. Why are only children affected and why only brain cancers? If this is a "Love Canal" scenario, then the government can take various actions from clean up to condemnation. But just like the Chinese Drywall, what is a homeowner to do about paying for two homes when barely one can be afforded?
In the midst of these crisis is the home lender. In these situations anyone would be hard pressed to say that the problem was caused by the lender. (Well, maybe some would say without the lenders the developers could not have built the lots and homes and without the lenders the homeowners could not have purchased the homes - so it is the lenders' fault the homeowners are in this predicament). The lenders did make the loans (in good faith, we presume) and they are thus entitled to be repaid.
These apparent catastrophes put homeowners in the position of deciding to default on their mortgages through non-payment or to seek short sales or deeds in lieu. If (and that is a BIG IF) there is a clear solution with a definite timeline, perhaps a lender would abate the loan (that is "delay" or "stay" the mortgage loan) payments based on the property becoming habitable once again in the foreseeable future. This is a theory, not a plan that is in action.
Maybe the lenders could take a deed to the home with an assignment of the expected government condemnation award. But expecting lenders to not enforce some return of loaned capital in most cases is not a realistic expectation, and borrowers should not anticipate this type of solution.
Disasters come in many forms and in large and small proportions. These examples usually avoid solutions to the dismay and the eventual financial hardship upon the homeowners affected. There simply are no quick nor easy solutions.
Copyright 2010 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.
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Our office has sold both an REO and a short sale with known Chinese Drywall problems. The buyers bought cheap and were disclosed the problems. I guess if the price is low enough somebody can go through the huge expense of fixing that issue.
Not sure what someone would do in the Cancer Cluster neighborhood or the Orlando neighborhood with the bombs in the ground. I'm in Orlando and it is pretty hard to believe that the county did not know this before allowing builders to go in there. They even built a Middle School on the bomb infested property.