(MCT)—Question: I listed my home for a short sale in October and recently received a contract from a buyer. I’m waiting for the bank’s approval. At the end of March, I was served with foreclosure papers. How is this possible if I have a contract on the property?
Answer: This happens quite often. It’s a common misconception that the lender won’t file a foreclosure lawsuit against you if you are negotiating a short sale or loan modification. You should expect to get served with a foreclosure lawsuit four months or so after you stop making mortgage payments. When you try to complete a short sale, it often takes a month or two to get it under contract and 45 to 90 days to get an approval from the lender. If you fail to respond to the foreclosure within 20 days, you will be in default and will have waived valuable rights in defending the lawsuit in case the short sale falls through. I recommend that you see an attorney about responding to the lawsuit.
Q: Can I quit-claim my house to my daughter without notifying my mortgage lender?
A: No, at least not without breaking the terms of your mortgage loan. Most loans have a “due on sale” clause that states that if you transfer the property, you need to immediately pay back the full balance. So while there is nothing stopping you from deeding the house to your daughter, if your lender finds out, it can sue you and your daughter to foreclose the home. It is a much better idea to try to get your bank’s permission, or have your daughter buy it from you using a new loan.
Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar.
The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.
©2012 the Sun Sentinel (Fort Lauderdale, Fla.)
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