Why do Attorneys think Foreclosure is no Big Deal?

By
Real Estate Agent with RE/MAX Executives Nampa, ID

Why do Attorneys think Foreclosure is no Big Deal?

 

More often than not, I have clients and customers tell me their attorney tells tem to just file bankruptcy and let the lender foreclose on the house.

 

WHAT!?

 

This is unbelievable to me!  I have asked several attorneys why they think this. I believe they don’t realize the credit impact a foreclosure can possibly have on a client’s ability to buy another home in the future.

 

Currently, on the standard 1003 loan application form, there is a question about foreclosure or deed in lieu of.  This must be disclosed as a material fact.

 

There is no disclosure, however, for a short sale on this loan application.

 

For an attorney to say that a short sale is the same as a foreclosure, to the client, is not accurate, in my opinion.

 

As an agent, I have an attorney that really gets it.  I use them as a second opinion sounding board for many short sale clients.

 

I think it’s important for a consumer to seek the advice of an attorney, but when they receive bad advice, what do you do?

 

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Comments (14)

Terkel Sørensen
Real Estate Places - Temecula, CA
Realtor, 951.805.0773 , Bank owned and Short Sales

I hear you. Just set up a client with loan mod pkg and instructions... Atty wanted $4k to help... iI think  there are some solid ones, but there are a few bad ones too - for sure...

Feb 03, 2011 02:34 PM
Deb Jamail
HomeLife Southern Properties - Galveston, TX
Galveston County Real Estate

Don

I don't believe attorneys are always the smartest in the room...obviously!  I think a second opinion is in order!!

Feb 03, 2011 02:38 PM
Nina Rogoff
RE/MAX Executive Realty - Medfield, MA
Sells Real Estate!

When you find a great attorney or home inspector or mortgage lender...hold on tight! They sure make a difference.

Feb 03, 2011 02:40 PM
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Don, Majority of real estate attorneys do not work with good agents, so suggesting short sale may be a risky proposition for  them. Usually in short sale by the time the Seller gets it closed, unless they kept making payments, their credit is shot anyway.

Bankruptcy and then foreclosure allows people avoid deficiency and 1099. I think it is often not such a bad advice after all. I spoke to the attorneys, and it is difficult to argue that we, agents, are maybe the only people benefitiing from short sale.

Feb 03, 2011 02:40 PM
Fred Griffin Tallahassee Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

     A good Attorney is going to look at each client on an individual basis.  

     By the time many people get to the point of "short sale", they have already defaulted on their Credit Cards and other obligations.   Their credit is shot to H--- already.

     Then there is the Deficiency, which must be reported to IRS on a 1099 (isn't that nice - you went broke, moved into a studio apartment, have no job, and now IRS demands Tax on the "Income" you received from the Deficiency).

     So maybe in some cases the Bankruptcy / Foreclosure is a better route to go.

     My only advice to Sellers in Default - make sure you are dealing with an Experienced Real Estate Attorney.

Feb 03, 2011 02:48 PM
Nita Shinsky
Shinsky & Assoc - Azle, TX
Broker, GRI, SFR, e-Pro

The world of short sales is changing on a daily basis. I understand attorneys sometimes think they "know" what is best for the client but they fail to gives their client the educated options for them to decide for themselves what is best for them. I hate to hear a borrower tell me they filed bankruptcy a week before the foreclosure. They think it stops the foreclosure FOREVER, like they don't have to make anymore payments, they just get to keep the house. I end up knocking on the door in another month or two to tell them the home is NOW in foreclosure and they need to consider cash for keys because their attorney didn't tell them if they filed bankruptcy they either needed to make payments or they would still lose the house.

Feb 03, 2011 03:00 PM
Sheila Newton Team Anderson & Greenville SC
Berkshire Hathaway HomeServices - C. Dan Joyner - Anderson, SC
Selling the Upstate since 1989

I am amazed that some attys actually passed the BAR exam!! Of course, I'm also amazed that some agents passed the real estate exam...

Feb 03, 2011 03:15 PM
Juli Vosmik
Dominion Fine Properties - Scottsdale, AZ
Scottsdale/Cave Creek, AZ real estate 480-710-0739

Don, I HOPE the attorney is taking to time to look at each case - what's lead up to the client seeking "professiona" advice?  How bad off are they?  There are 3 attorney's here in the Phoenix area who have recently had their licenses suspended for the practice of leading WAY too many people straight to the BK courts without reviewing any options that may be better for the clients.  I say HOORAH for the court systems for helping!!!!

Feb 03, 2011 03:24 PM
Jim Hale
ACTIONAGENTS.NET - Eugene, OR
Eugene Oregon's Best Home Search Website

It is completely unclear to all of us just what the credit impact of either will be in the out-years -- when many more people have been through both processes than ever before in the modern credit age.

Feb 03, 2011 03:59 PM
Jim Hale
ACTIONAGENTS.NET - Eugene, OR
Eugene Oregon's Best Home Search Website

Woudn't it be nice if attorneys were required to say: you should seek the advice of a (real estate) attorney before taking MY word for it.

Feb 03, 2011 04:03 PM
Deborah Byron Leffler BzyBee Real Estate Lady!
Keller Williams Realty Boise - Nampa, ID

Don....was just fretting over this one!   Lost a short sale as the attorney told her to file bankruptcy and let the house naturally foreclose....she could then save the money....and that short sales would happen to fast and she wouldn't have any savings and would be out in the cold!  uuggghhh  

And a deed in lieu is as bad as a foreclosure in my opinion!     So very frustrating!!!

BTW...congrats on surpassing 300k!!!

Feb 04, 2011 02:28 PM
Don Wixom
RE/MAX Executives Nampa, ID - Nampa, ID
"Looking out for your next move..."tm

Terkel, yes, always good and bad mix...

Deb, I think a second opinion is good in almost anything we do!

Nina, yes, that's where referrals come from. I want to be that "Good Realtor" on the other end!

Jon, in some cases, it's not bad to go through with the foreclosure, but if it is not necessary, why encourage it for a consumer who has viable options?  The consumer can benefit HUGE from a short sale and avoid foreclosure!

Fred, ruined credit is one thing, but once back on their feet, a consumer can buy another home within 2-3 years following a short sale and most likely not until 7 years following a foreclosure.

Nita, "educated options"  I like that.  That's what attorneys AND real estate practitioners should be giving to consumers!

Sheila, true that!

Juli, yes! It's good to see some accountability!

Jim, again, a second opinion is a great idea! Having relationships with attorneys of like mind and understanding can help!

Deborah, I agree! Very frustrating! More so for the hurt consumer, than the loss of our commission. Thanks for the congrats! It was good to see you today!

 

 

Feb 04, 2011 02:54 PM
Jim Hale
ACTIONAGENTS.NET - Eugene, OR
Eugene Oregon's Best Home Search Website

Either way, whether it's a short sale or a foreclosure, it's likely that agents are going to be paid.

 

Attorneys, on the other hand usually only get paid for what?  Foreclosures and bankruptcies.

 

Which attorneys know about about bankruptcies to really have an educated opinion?

 

Bankruptcy Attorneys.

 

I rest my case.

Feb 04, 2011 03:32 PM
Don Wixom
RE/MAX Executives Nampa, ID - Nampa, ID
"Looking out for your next move..."tm

Jim, interesting take... This attorney told me it's too much work to abandoned the home from the BK.. What!?

Feb 05, 2011 09:05 AM