This video from one of my favorite movies (Monty Python and The Holy Grail) is symbolic of what happened to the new Illinois short sale law as it wound its way through the legislature. You’ve seen it. King Arthur and the Black Knight get into a sword fight. King Arthur carves up the Black Knight limb by limb, until nothing remains. That’s pretty much what happened to this new statute just signed into law last week.
When I first saw that a new short sale law was working its way through the legislature, I hoped that it would help clear out the backlog of near-foreclosures and get the real estate market back on track. Initially, the new law required lenders to respond to a short sale offer in 30 days and it said that all approved short sales in Illinois must include a release of deficiency. California passed a law that prohibited deficiency claims on first and second mortgages not too long ago and I was hoping for a law similar to theirs. But as the law worked its way through the legislature over the past year, the forgiveness of deficiency was amended out of it and the requirement that the lender respond in 30 days was extended to 90 days.
As passed, the law does one thing: Requires the lender to respond to a short sale offer in 90 days. That’s it. And there’s no penalty if the lender doesn’t respond. Basically, the new law does nothing and that’s not good at a time like this when so many homes are way, way underwater.
Last year, I did a lot of phone consultations with clients about their underwater homes and condos. About 80% of those I talk with have already decided to strategically default. They could continue to pay the mortgage, but choose not to, because the property is $80k to $100k underwater. Usually, they are completely freaked out…
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Many clients think that if they miss one mortgage payment, the bank will immediately come by, change the locks and repossess their home. Nothing could be further from the truth. Foreclosures take more than 1 year in Illinois. During that time, the owner, not the bank, is entitled to possession of the property. Near the…
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After suffering through a foreclosure or short sale, there’s a final kick in the teeth. It comes in the form of a 1099 from your ornery mule of a lender. For the last few years, with foreclosures in high gear, many homeowners were able to avoid paying tax on the 1099 issued after short sales…
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A well-traveled internet myth is that short sales are “better” on your credit than foreclosures. It’s not really true that short sales are softer on your credit than foreclosures. A short sale can be nearly as bad as a foreclosure on ones credit, depending on the circumstances. After a short sale closing I had last…
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This morning, I read with interest a story in the Wall St. Journal called “House is Gone But the Debt Lives On.” When I finished reading the story, my first thought was…this is going to freak out a lot of people unnecessarily. (Aside: I read this on my Ipad and I highly recommend the WSJ…
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For years and years, the Cook County senior exemption for real estate taxes, which reduces the tax bill of those over 65 years old by about $250, did not require an annual application. Now it does. Surprise, it’s all messed up because no one realizes that they have to file the application. It appears that…
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When it comes to real estate closings, Sellers and Buyers agree on almost nothing, except maybe one thing: They both hate paying for title insurance. Clients on both sides react to paying for title insurance like they are being forced to pay for a minority interest in a strip mine in Nevada or a timeshare…
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I’m always surprised that so many owners in foreclosure (including those who strategically default) decide to move out of the property early in the foreclosure process. I’d say at least half leave the house as soon as they stop making mortgage payments. In Illinois, foreclosure takes about 16 months (from the first missed payment) and…
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Last week, I emailed the negotiator for a particularly pesky and difficult short sale lender and asked him, not so politely, to release my client. This was the fourth time I had asked him to release the deficiency (difference between what the lender was to receive and what the lender was actually owed). The first…
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