Non-Retention Options for Distressed Real Estate are options for a property owner who decides not to try to hold onto their home or other real estate that is distressed. The property owner either has decided that the home or other real property is not a viable place to continue to try to afford or the they have found better options in terms of home affordability and are ready to surrender the home or other real property in a negotiated settlement that takes into account the property owner’s interests in such surrender. Those other interests include but are not limited to the following: time, cash , elimination of potential liability, elimination of real liability, better credit and the ending of a potential nuisance. The homeowner can potentially deal to obtain these benefits because the property owner has something to bargain with, namely the willingness to give up: various levels of ownership, possession and/or rights/steps in the foreclosure action. The lender usually is willing to trade with the property owner in some sort of fashion in return for such advantages. The Non-Retention Options can come in several forms and depend on the willingness of the lender to give the property owner sufficient consideration to continue the trade. Non-Retention Options can include: Third Party Voluntary and Short Sales, Deed in Lieu, Cash for Keys, Consent to Judgment and/or Abandonment of Property.
The initial difference between Retention Options and Non-Retention Options is that in the former, Retention Options, the main goal of the property owner is to find a way to keep the property, whereas in the latter, Non-Retention Options, the main goal of the property owner is the opposite, not to keep the property but to allow its loss or transfer while trying to extract maximum advantages for the property owner in exchange for the property. Usually, but not always, a property owner chooses Retention Options for their primary home and Non-Retention Options for a secondary property like an investment, rental, vacation or commercial property. However, choosing Non-Retention Options for even the property owners home can occur where there has been a major disruption in their lives like a serious consequential business setback, job loss, health issue and/or marital issue.
Non-Retention Options are used when the property owner either does not or can not maintain the property and rather than fight or delay a foreclosure has decided to bargain for other advantages such as cash, release from liability or potential liability and/or time. Usually a homeowner would prefer to go with the opposite, Retention Options, in order to stay in their homes if even remotely possible. The disadvantage of Non-Retention Options is balancing out the desire for a deal with the need to resist the foreclosure until the deal is obtained. The advantage is that Non-Retention Options are more straight forward than trying to keep a property with challenging payments.
Non-Retention Options are not always the same in what they give up in terms of aspects of property ownership. They can give up various forms of ownership and/or possession or litigation positions depending on the type of transaction agreed upon by the property owner and lender . The different aspects to ownership and/or possession that can be given up by the property owner are as follows:
The advantages in terms of what is obtained by the property owner in order to give up the above aspects of their ownership over the property, include but are not limited to the following non-Retention option advantages:
1. Time to Stay at the Property – The property owner may negotiate for time at the property for themselves, or for parties that they are trying to help like renters and/or family. The property owner may be able to get more time by defending the foreclosure but if the property owner is not interested in the expense and effort of litigation and/or already missed deadlines and advantages in the litigation, just bargaining as opposed to litigating to obtain more time many be a feasible alternative,
2. Cash for the Deed and/or Possession – The property owner may have already decided to move and therefore a relatively small small amount of cash 3k-10k is usually what they can obtain at the end of a foreclosure action where the lender’s path would be hard to stop and if the property owner has not defended. However, if the foreclosure gets bogged down and/or the property owner fights back and defends vigorously in the litigation there is a better chance for a transaction where the lender agrees to pay more to conclude the foreclosure action. Large payouts in cash may exceed 35k where lender realizes that the litigation may be involved, and potentially complex and costly
4. Better Credit – The homeowner may prefer allow the lender to sell the property at a foreclosure sale or to give ownership to the lender consensually to avoid title issues due to the fact that junior liens may be large enough to be significantly to interfere with a third party sale. Once the property is transferred the former owner can by agreement work with the lender to remove items on the credit report that show that the foreclosure is still in progress and substituting better items for the credit report that show that there is no longer a foreclosure proceeding and that the property owner settled and owes no deficiency or any other monies toward the property.
3. Elimination of Real / Potential Liability or Ending Possible Nuisance – As the owner of the property and the one liable for real estate taxes, ordinance compliance, and safety at the property, the property owner is liable for real estate taxes, meeting legal requirements, and for persons injured on or because of the property. To the extent the property owner isn’t living at the property or earning income from the property, it can more more of a potential detriment to keep the deed and possession in his own name. This is true if the property is in a high crime area and could potentially be inhabited by squatter or visited by persons engaged in illicit activities such as illegal narcotics. Therefore, in such a situation giving the property to the bank is advantageous. The property could also become a possible nuisance if it houses problem tenants, or has inherent risks associated with the property, such as incomplete construction that is potentially dangerous, that are avoidable if ownership is transferred.
There are several different types of non-retention options where the advantage to the property owner varies and what is given up in terms of the legal and/or possessory rights also varies. Here are some of the options in terms of options where the property owner gives up some aspect of the property in return for other benefits:
There are several administrative steps that must be implement to pursue Non-Retention Options as follows:
There are several reasons why our office is ideal to help with Non-Retention Options:
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