Foreclosure in Florida is a unique beast. Backlogged foreclosures are completely out of control, and the average timeline for the completion of a foreclosure is 893 days. Read more
Most states cap their timelines out at 120 days, but with lenders in Florida being so foreclosure happy in a struggling economy, the process has become a real nightmare for everyone involved.
In 2013, House Hill 87 was put into effect, and it largely changed the foreclosure process. Rather than helping lenders and homeowners move through the overwhelming back catalog of foreclosures, it actually convoluted the process much more. In the majority of states, lenders prefer to utilize nonjudicial foreclosure methods. In Florida, that’s not an option. Every single foreclosure has to be processed through the court system – and court proceedings are long and costly.
Though the law was designed to make the foreclosure process faster by offering an expedited procedure, even an expedited procedure can take a few months to complete. While all of this is going on, you owe interest on your defaulted loan. Since the housing market is so poor in many areas, many homes sell for virtually pennies on the dollar once they finally go to foreclosure auction.
This is also bad news for everyone. Florida allows deficiency judgement. If your home (which is already low in value for many areas of the state) has a fair market value of $70,000, it may sell at auction for as little as $15,000 in the current market. Your lender is then allowed to file a suit for a deficiency judgement, which would allow them to hold you accountable for $55,000. Your lender will stop at nothing to get that money, though they may not be able to actually recover it from you due to bankruptcy after a foreclosure.
Your lender hates having to follow through with foreclosure, and you’ll hate to have it happen to you. Don’t let your lender complete the foreclosure. Short sale is a great alternative. It may be complicated to navigate and it could take some time, but it’s nowhere near as lengthy, difficult, or damaging as the actual foreclosure process.
Find a home investor who is willing to purchase your home as a short sale. They’ll work with your lender to negotiate a reasonable sale price. Investors don’t buy homes at full market value, but that’s okay. After all the money your lender will have to spend, and all the lost income that will occur as a result of an unreasonably lengthy foreclosure process, they’d rather take what they can get and move on. It’s a better economic decision on your lender’s part to accept the offer.
In the process of the short sale, you can draft up something called a waiver of deficiency. If your bank signs this, it means they’re giving up their right to pursue you for a deficiency judgement This means that after the short sale, you’re off the hook with your lender. Short sale is something of a loophole, but it’s a loophole that benefits everyone. You aren’t in a massive amount of debt, your lender can recover a lump sum of money without having to work tirelessly for it and lose income in the process, and the investor gets an affordably priced home.
All you need to provide is proof that you can’t continue making the payments. Considering that you’re already in foreclosure, this will probably be really easy for you to do. Show pay stubs, bank statements, outstanding debts, tax returns, and write a letter of hardship. Your bank will most likely be eager to approve a short sale, especially if you act quickly.
Short sales appear on your credit history as a loan that was settled, rather than paid in full. This is very bad for your credit, but foreclosure is much worse. If you’re smart about rebuilding your credit, you can negate the effects in 3 to 5 years. With a foreclosure, you’re trapped for a full 7 years – no matter what you do.