Avoiding Predatory Practices

PSA –Protecting Your Home and Finances

I hope this blog prevents another family, older couple, or individual from losing their home & equity. Unfortunately a sweet couple reached out to me too late asking me to explain to them what they had signed & asking me to help them. You see, they had gotten behind on their mortgage. They were down to one income & the medical bills were mounting. They received a default (foreclosure) notice. (Which is public record & which I will get to soon) Could they have planned better? yes. Could they have addressed it sooner? Of Course. However, none of that justifies sketchy practices or makes it right.

In times of financial hardship, homeowners can become vulnerable to predatory practices that promise relief from foreclosure or quick cash offers for their homes. While some options may seem tempting, it’s crucial to be cautious and well-informed to avoid falling victim to scams that can lead to even greater financial distress. In this blog, I’ll explore the risks associated with “subject to” deals and provide guidance on how to make informed decisions when facing foreclosure.

Understanding Predatory Practices: “Subject To” Deals

“Subject to” deals involve transferring the ownership of a property to an investor while the existing mortgage remains in the homeowner’s name. (sounds crazy right?) This is presented as a solution to foreclosure & it comes with significant risks.

The couple who called me had signed a “subject to” purchase agreement after talking to a very convincing man who knocked on their door (Foreclosure notices are public) with an agreement in hand. They thought they would still own the house & make their house payment to this man, but in reality, he was paying them $2000.00 for their house, turning them into tenants with an even higher payment, taking their deed, & leaving the mortgage in THEIR NAMES. (As I am typing this I am both angry & sad again). No Real Estate agent or Real Estate Attorney was involved though it is a legal document. AND… this man is telling people that Realtors can’t be trusted & will only slow the process down. Hmmm.. He’s discrediting an entire industry. He wants you to know he can be trusted though. This tactic sounds familiar to me. How about you?

NOW about that:

Here are some of the Risks:

Loan Default Responsibility–

With the mortgage still under your name, any missed payments or default could damage your credit score , and financial future

AND you have no control to get out of the situation & can’t sell the house since you don’t own the deed,

AND because the mortgage is still in your name, your credit is still tied up & you may not be able to get qualified to purchase while that mortgage is still in your name,

AND you could be told to move out.

Loss of Equity:

Investors often pay below market value for “subject to” properties, which means you may lose out on your home’s equity.

Legal Complexities:

Transferring property ownership without lender consent may violate the mortgage agreement, & if the lender is contacted for consent, lender may request the loan be paid in full & the person you’re entering into the “subject to” deal may or may not be creditworthy to take on the loan so you could be back at square one.

Hidden Fees:

Beware of hidden fees and costs associated with selling your home, which can eat into your limited proceeds.

Safeguarding Your Interests: Consider these alternatives to navigate financial hardships while protecting your rights and assets:

Alternative #1: Loan Modification: Contact your lender to explore loan modification options, which could lower monthly payments and make them more manageable.

Alternative #2: Sell with a Trusted Realtor: List your house with a reputable and trusted real estate agent who can help you navigate the market and find a fair buyer. This could include options like a short sale, where the lender agrees to accept less than the owed amount. (Most homeowners in 2023 should owe less than the home is worth though)

Alternative #3: Rent Out Your House: If you have a spare room or can temporarily relocate, renting out your property can provide an additional income stream to help cover mortgage payments and avoid foreclosure.

Alternative #4: Credit Counseling: Seek guidance from accredited credit counseling agencies that can help you create a plan to manage debt and avoid foreclosure.

Alternative #5: Legal Advice: Consult an attorney who specializes in real estate and foreclosure to understand your rights and options.

Conclusion: When facing financial hardship and the threat of foreclosure, it’s crucial to remain vigilant against predatory practices that promise relief but may lead to even greater difficulties. Avoid “subject to” deals that can jeopardize your financial future and home equity. Instead, explore legitimate alternatives like renting out your property or working with a trusted realtor to sell your house. These alternatives prioritize your interests and provide a path toward stability and recovery. Remember, seeking professional advice from qualified experts is essential to making informed decisions and protecting your home and financial well-being & realtors have a fiduciary duty to their clients & their Clients’ best interests.