For any Florida home owner with a mortgage dilemma, there will be big decisions to make:  whether to short sale, whether to strategically default, whether to try a loan modification, and what to do about any resulting deficiency judgment.  These decisions will hang over the Florida home owner’s head for months and months – if not years and years – but the thing that most Florida home owners may not realize is the minute that lose their home at a foreclosure sale (and, in some instances, after a short sale), they will be facing loan collection efforts.

10 Things Florida Home Owners Should Know About Mortgage Debt Collectors

Federal law (15 USC Section 1692) and Florida law (Florida Statutes 559.55 et seq) exist to protect Florida home owners who are behind on their mortgage payments, specifically to protect Florida mortgage holders from the bad acts of debt collection agencies and even attorneys hired by banks to act in the role of a debt collector.  Here are several things that Florida mortgage home owners should know about their situation:

1.  In Florida, a mortgage debt collector cannot contact you on a whim.  The law prohibits the mortgage collection from calling your before 8 am or after 9 pm.  Mortgage collectors cannot call you at work once you tell them not to do so.

2. Mortgage collectors cannot threaten you with use threats of violence or harm.

3.  Mortgage debt collectors cannot use profanity in their communications with you.

4. Mortgage debt collectors cannot claim that they are lawyers.

5.  Mortgage debt collectors cannot tell you that they work for one of the credit record companies (Experian, Equifax, TransUnion).   Credit reporting companies are not in the business of debt collection.

6.  Mortgage debt collectors cannot state or imply that they are sending you legal documents if they aren’t really about to do so.

7.  Mortgage debt collectors cannot state or imply that you have committed a crime because you haven’t paid your mortgage.

8.  Mortgage debt collectors cannot state or imply that your wages will be garnished or your property seized, unless the bank has obtained the legal right to do so and is about to exercise that right.

9.  Mortgage debt collectors cannot state or imply that you are about to be sued unless the bank is indeed about to file a foreclosure action or a deficiency lawsuit.

10.  Mortgage debt collectors send you any document that appears to be a court filing or an official government document – they cannot send you phony paper, only legitimate documentation.

Larry’s Tip

Mortgage debt collectors can only contact your Florida foreclosure defense attorney or short sale lawyer if you have hired a lawyer to represent you in any collection matter.  If you have a lawyer, the law requires the mortgage collector call your lawyer, not you.  Your Florida mortgage attorney can work with the lender and the lender’s debt collector on your behalf, arguing your defenses to the debt itself, as well as negotiating the mortgage debt, the short sale, and the deficiency.

Furthermore, your Florida real estate lawyer can fight against unfair mortgage debt collection efforts on your behalf, including filing suit against the collection agency, filing complaints with the appropriate agencies for unfair collection practices, and dealing with the lender on the actions of their collection agent.

For example, after a Florida short sale, if a deficiency amount remains on the mortgage, then the bank may start collection efforts on that amount, together with interest on that amount (usually at the rate of 18% per year (default rate)).  However, a Florida short sale lawyer may be able to find legal defenses to these collection efforts, based upon the bank’s own actions (or failures to act) including Statute of Limitation defenses pertaining to the debt and the inability of the bank to prove up the legal validity of the mortgage debt.

Having a Florida lawyer on your side when you are facing foreclosure, trying to get a short sale of your home, or wanting to renegotiate a home mortgage loan is always helpful – but what many Florida home owners do not realize is that having a lawyer on your side as soon as possible can lessen the daily stress of the situation, such as having the attorney take on the burden of dealing with the bill collectors.

If you have questions or comments, please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com or (954) 458-8655.

There’s Lots to Consider When Florida Home Owners Decide On Whether or Not To Default on Their Mortgage

We’ve also discussed the reality that here in the State of Florida, there is the real chance that the bank (especially if it is a small bank or a credit union) will file a lawsuit against the person who defaulted on their Florida home loan for the amount left hanging on the note: the deficiency lawsuit is a real possibility for many here in Florida.  And deficiency judgments can be used to take personal assets to pay off that old home loan amount for years into the future.

Which is why we discuss the importance of negotiation on the deficiency before things get to the courthouse and a final judgment or order is issued by the judge.  Read about those issues in more detail here.

One issue that isn’t discussed as often, either in the national news coverage or here on our blog, is one very big reality that impacts almost every Florida home owner who decides to default on their mortgage.  That’s the ugly truth that collection efforts will be a real part of your life once you stop making those payments.

Collection Efforts Are Legal – If They Are Done Right

It’s legal for the lender to take steps to try and get you to make those loan payments.  For many Florida home owners, this is a new experience.  They’ve never had a bill collector contact them before.

And it’s an emotional and stressful situation.  The collection efforts include mailing letters, making phone calls.  Collectors who are trying to get you to pay up: to bring things current.  Collectors who spend their workdays, day after day and week and week, doing this for a living.

It can be irritating at best for the home owner, devastating and draining at worst.  And this is when the collection activities are done within the bounds of the law.

Collection Efforts Are Controlled by the Fair Debt Collection Practices Act

Congress has passed the Fair Debt Collection Practices Act (FDCPA) which controls how collection efforts can be done in this country.  The federal law has specific guidelines that the collector should be very, very aware to abide by, including the times of day when they can call you; how many times they can contact you each day; whether they can contact you at work; etc.

The State of Florida also has its own laws to protect against unfair collection practices, the Florida Fair Debt Collection Practices Act.  This law protects Florida mortgage holders when the federal law does not — if there is a conflict between the two laws, then the federal law controls.

Larry’s Tip

If a collector violates the FDCPA in his or her collection efforts on your unpaid mortage, then you can file a lawsuit in either federal court or Florida state court for the violation. You have one year to file this suit from the time that the collector violated the FDCPA.

If you sue for a FDCPA violation and you win, then:

• the collector can be forced to pay you a damage award for any damages you have sustained because of his or her collection efforts, including for example lost wages and doctor bills/medical expenses.
• the collector can be forced to pay you $1000 on the barrel head, even if you don’t have any damages to prove up (no lost job time, no medical costs)
• the judge can also make the collector pay for your expenses in pursuing the lawsuit, including paying you back for all your court costs and reimbursing you for your attorney’s fees.

Remember, however, that even if it is proven that a mortgage debt collector violated the FDCPA, the mortgage debt or deficiency does not go away: you still legally owe that debt until it is resolved under state mortgage law.

If you have questions or comments, please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com or (954) 458-8655.

Here are five things that you should know about the income tax benefit for short sales, foreclosures, and loan modifications that ends in December 2012:

1.  What is this federal law and why does it automatically end?

The federal law is a statute called the Mortgage Forgiveness Debt Relief Act of 2007. It is a law passed by Congress that lets you exclude the income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.

The Act doesn’t say this isn’t income to you; instead, it makes this income nontaxable.

It became effective on December 20, 2007, and it was extended once, in 2008, as part of the  Emergency Economic Stabilization Act.  Federal laws do not live indefinitely; they have a life span and in this law, the end date for the law was included in its language.  It was passed to only be active for a certain amount of time — unless another federal law was passed by Congress that extended its effective date.  That’s happened once.  No new law now means that the tax break ends by the terms of the law as it was passed and extended.

2. The Tax Break Helps People Who Have Had Debt Cancelled: What is Taxable Income Cancelled Debt?

Cancelled debt is debt that has been forgiven.  When you borrow money from a bank for a home loan and then, either in a short sale, loan modification or foreclosure, the bank forgives part of the original mortgage amount, you have cancelled debt.  Since you have received money and are not paying it back, it’s considered to income to you under the federal tax code.  Income that’s taxable.  Except, when it’s not.

Some types of cancelled debt that is not taxable include:

Debt cancelled that is connected to a principal residence debt in accordance with the Mortgage Debt Relief Act of 2007.

Debt cancelled under the federal bankruptcy laws.

Debt cancelled for someone who is legally insolvent.  This is important to many Florida home owners as they consider short sales, foreclosures, and loan modifications after 2012.   If  your total debts are more than the fair market value of your total assets, then you are “insolvent” and some of your cancelled debt may not be taxable income.

3.  There are limits to the Tax Break Applying to You Before It Ends: the Mortgage Forgiveness Debt Relief Act Doesn’t Apply to All House Related Cancelled Debts

The Tax Break, as favorable as it is for Florida home owners and other homeowners across the country, does not cover everything related to mortgages on homes.  It has its limits.

• The Tax Break can only be used for cancelled debt on loans made to buy, build or substantially improve your principal residence.
• It applies only to cancelled debt that is secured by the home.
• The tax break has maximum amounts that are excluded from taxable income calculations: $2 million forgiven ($1 million if married filing separately).

4.  Sometimes refinancing is covered by the Mortgage Forgiveness Debt Relief Act.

Cancelled debt on a refinanced home mortgage will be covered by the Tax Break, up to the amount of the balance of the mortgage at the time that it was paid off by the refinancing.

5.  The Tax Break Covers Forgiven Debt but There’s No Tax Break for Losses

Not everyone gets forgiven debt in a foreclosure; sometimes, people lose money on a foreclosure of their home.  In these instances, that loss isn’t given any special consideration under federal law.  No tax break for these folk.

Larry’s Tip:

When you sell your home in Florida and the bank forgives the balance on your mortgage, this is good news for you because the lender is giving up his state law right to sue you in a deficiency lawsuit and thereafter to execute on your assets via a deficiency judgment.

It’s a victory for you to get this forgiven debt negotiated.

However, there’s still the federal income tax laws to consider. The amount that the bank has forgiven will be considered income to you, no matter how unfair that may feel and no matter how horrific your circumstances may be.

The Tax Break can be a true lifesaver for people in dire need of a fresh start.  However, it’s going to end on December 31, 2012.  Next year, as harsh as it may be, the victory in getting a deficiency amount taken off the bank’s records may still mean a battle for the homeowner.

That hard pressed homeowner might be able to avoid paying tax on that forgiven amount if they can demonstrate that they were insolvent immediately before the discharge, for example, or if they were involved in a bankruptcy.

It will be easier for Florida homeowners to take advantage of the Tax Break before 2012 – but for some, there is still hope that the forgiven debt may not be taxed as income in some situations.

If you have questions or comments, please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com or (954) 458-8655.

Back in 2007, Congress passed the Mortgage Debt Relief Act of 2007 which created help for homeowners facing foreclosure, giving them according to the White House news release:

“… a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. Under current law, if the value of your house declines, and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as income that can be taxed.”

The federal law, in sum, meant that any deficiency on a home loan that was forgiven by a lender would not be considered as income for income tax purposes.   This helped people, and in 2008 the tax break was extended to 2012.  However, it hasn’t been extended a second time and now, as of December 2012, it ends.

What does the expiration of the Mortgage Debt Relief Act of 2007 Mean to Florida Home Owners?

The Mortgage Debt Relief Act of 2007 helped lots of people, and it’s already been extended once.  However, that extension period ends December 31, 2012.  No more tax break.

For those in South Florida considering a short sale of their home, this is very important.  In a short sale, the seller sells their home at a price that will not cover the mortgage’s principle balance.  This amount (mortgage amount less sales price) is called the ‘deficiency’ and in Florida, the lender can sue in a civil lawsuit to get that amount from the seller via a “deficiency judgment.”  For more details on this, please read our earlier posts that go into more detail on this process.

However, if the lender agrees to skip that process and waives the deficiency, then the seller gets a real benefit:  the freedom to move forward in life without waiting for another shoe to drop with a deficiency lawsuit or dealing with debt collectors.  And, as long as the Mortgage Debt Relief Act of 2007 is in effect, the seller also gets the benefit of that amount not being sought in a deficiency lawsuit as being taxable income.

After the end of this year, things will change.  Beginning in 2013, lenders will report the amount of the cancelled debt to the Internal Revenue Service on a Form 1099-C, Cancellation of Debt. The mortgage holder will get a copy of this 1099-C which he will have to include in his tax return.  The amount shown on that form will be considered as taxable income by the IRS.

Larry’s Tip

The Mortgage Debt Relief Act of 2007 applies to short sales as well as foreclosures and loan modifications – any time that the lender agrees to take less than the full balance remaining on the mortgage.   It’s a great help to people in these situations.  People that need a break.

In South Florida today, lenders are burdened with lots of foreclosures in process and lots of homes on their books and they are becoming more willing to negotiate with home owners than in years past.  That’s good for Florida home owners wanting to short sale or negotiate new terms for their mortgage.

However,  banks here in Florida are notorious for moving slowly.  Very slowly.  Given this deadline of December 31st to get in under the wire and avoid having taxable income on your short sale, foreclosure, or loan modification, it is not wise to delay or to try and deal with these institutions on your own.  Don’t procrastinate.  And don’t be a Lone Ranger here: get an experienced real estate attorney or short sale lawyer on your team.  They will know the reputation of your lender as well as the legal hurdles involved in your situation.

It’s best to get moving now to make sure you don’t lose this tax break.

If you have questions or comments, please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com or (954) 458-8655.

Great Example of Appraisal Negligence

In a story written by Jonathan Miller for the Business Insider, entitled “This Nightmare Home Appraisal Story Shows Why The Housing Market Is Still Messed Up,” the photographs add a lot of punch and really help to show how bad and how blatant many real estate appraisals are, all across the country.

In the New York case, the appraiser included a house with a HOLE in the side of it (you can see it in the photos that accompany the story) in his chosen properties that were used as comparables in a refinancing appraisal.

Brings new meaning to a place being a “hole in the wall,” doesn’t it?

Why would an appraiser do this?  Because this would bring the appraised value of the property down.  Lower than it should be.  Now, why would an appraiser want to bring in an appraised value that was lower than it should be? Because they profit from it – by rushing to get the job done and their invoice paid without making sure that the job has been done right.

Appraisal Fraud vs Appraisal Negligence

Much of the appraisal fraud we’ve been monitoring here involves the rampant fraud where appraisals have been artificially inflated by those involved in mortgage fraud.  A higher appraisal means a higher loan.

For example, in the local news there is a story about a Keys mortgage fraud case that has hit the Florida criminal courts.  Seems that phony, artificially high appraisals were used by the wrongdoers to get a higher loan and therefore, more money in their hands.

However, it’s important to remember that appraisals can be flat out wrong not only because real estate appraisers are inflating the values but also because there are appraisers that are making obvious and blatant errors just to churn their files and get them done.

Do we really think that the appraiser bothered to go and drive by that hole in the wall house?  Don’t we believe that he just sat at his desk and whipped out that appraisal without making sure his data was correct?

Larry’s Tip

In Florida and across the nation, real estate appraisers must abide by the Uniform Standards of Professional Appraisal Practice (USPAP).  It’s their rule book.

Real estate appraisers also have to be licensed to appraise real estate in the State of Florida.  You can check to make sure that an appraiser is licensed to work here in Florida with a simple online query.  You can also file a complaint about a Florida real estate appraiser with the state licensing board via the web.

However, when you are involved in a real estate transaction – like a short sale, where the appraisal value and sales price will impact your potential deficiency – then it’s best to get the assistance of an experienced real estate attorney to help you investigate the appraiser (or appraisal company) that the bank wants to use, as well as any history of complaints and disciplinary action.

Your real estate attorney can also help you review the comparables that the appraiser has selected in making his findings.  Is he right?  Is there a hole in the wall in one of the properties?

In a real estate appraisal of a single family home remember:

• the comparables should have square footage
• the comparables should be around the same age
• the comparables should have the same number of bedrooms, bathrooms, etc.
• the sales shown in the appraisal should have closed within the past 6 months
• the sales should involve individual buyers and not corporations or investment companies (because those sales may be skewed lower than an individual buyer’s sales price).

If you have questions or comments, please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com or (954) 458-8655.

What is the Servicing Alignment Initiative?

The Servicing Alignment Initiative is a way to force mortgage lenders with delinquent home loans that have been guaranteed by either Freddie Mac or Fannie Mae to streamline their policies and operating procedures when dealing with home loans that have gone delinquent.  In other words, it’s a way for the federal government to try and get this housing mess solved by getting the lenders to operate in an efficient and consistent manner, across the board.

The good news for home owners is that the Servicing Alignment Initiative works – or it’s suppose to work – to keep home owners in their homes by encouraging (read that pushing) lenders to find ways to resolve delinquent notes other than foreclosing.  From the Freddie Mac site:

The alignment will help Servicers resolve delinquencies more consistently and efficiently, keep more borrowers in their homes whenever possible, and minimize losses to the GSEs and taxpayers.

How Does the Servicing Alignment Initiative Work?

For home loans that are backed by Fannie Mae or Freddie Mac, the federal program works on mortgage servicers and home loan lenders in the areas of: (1) borrower contact, (2) delinquency management practices, (3) loan modifications and alternatives to foreclosure, and (4) foreclosure time lines.   It does this with money incentives and mandatory fees.  That’s right: the feds are offering money incentives to get this ball rolling.

Working with the lenders, the Servicing Alignment Initiative is designed to do several things, among them:

• Improved service to borrowers
• Clear borrower communications
• More efficient processing of loan modifications

How Does This Help Florida Home Owners Thinking About a Short Sale?

One thing that the FHFA’s Servicing Alignment Initiative does is make short sales that much more favorable to the mortgage lenders.  Not only are the Florida lenders – facing the huge bottleneck of foreclosures already on the books – finding short sales a better alternative to filing more foreclosure law suits, but the Servicing Alignment Initiative does something ever better, speaking the very language of banks:  money. Under this new FHFA Servicing Alignment Initiative, mortgage loan servicers will get paid money now to proactively communicate with their delinquent home loan borrowers – and that’s going to help push short sales into a very popular position in 2012.

That, plus the fact that short sales need to be done before the end of 2012 in order to avoid federal income taxation on the seller who avoids a delinquency (more on that in a future post).

Increased Bank Communications on Your Delinquent Mortgage Home Loan? Be Careful, Be Wise

One of the things that the Federal Servicing Alignment Initiative does is push the banks to communicate and negotiate with bank customers.  Which means that home owners with past due mortgage payments may start getting more letters and phone calls and emails from their mortgage servicer.

That’s good.  And that’s bad.

It’s good to start communications because that is how deals get done.  It’s bad if the home owner isn’t prepared to protect his legal rights when dealing with an adversary: and these days the bank is your adversary, not your friend, no matter how friendly they may be.  Not all Florida banks are the same and not all Florida banks deal with people the same way: you need to know who you are dealing with just as much as you need to know what law applies in these situations.

Having an experienced Florida short sale lawyer or Florida real estate attorney in your corner is important.  The bank will have its own legal team, it is smart to educate yourself about Florida law and how it applies to your circumstances before you start negotiating a loan modification or finalizing a short sale (and negotiating that deficiency) with your bank.

As a South Florida real estate lawyer with a history of dealing with distressed property, as well as representing sellers and buyers in ordinary real estate closings, here are a few tips and bits of information that may be helpful to anyone pondering a short sale:

1.  Does the bank have a right of first refusal on any short sale?

No.  The lender must approve the transaction to the extent that it is releasing its rights for an amount that is less than what is due.  However, that okay from the bank is a precondition to the sale going through, it is not a contractual right like a “right of first refusal.”  In most real estate transactions, a right like that is usually held by other potential buyers who have the right to come in and buy the property if he or she can meet the terms offered by a third party.  For example, a family homestead may have the children holding rights of first refusal before the home can be sold to a stranger.

2.  Are listing agreements with a real estate broker different in a short sale?

They can and should be.  Real estate brokers do not have blanket contracts; each realtor will have its own paperwork, and within it, they may have different terms depending upon the situation.  Since everyone is making less money on a short sale, some Florida realtors may choose to have a contract term in their deal:  for example, the listing agreement may state that once a purchase contract has been signed by a seller and a buyer the realtor’s job is done and they have earned their commission.  They have no duty to bring any additional offers to the buyer.  No waiting to make sure the lender okays the deal.  A term like that isn’t friendly to a seller who is trying to negotiate a deficiency waiver with their bank.

3.  Can you present an unsigned offer to the lender for approval of the short sale before you sign onto the deal as the seller?

Maybe.  Some, very few, banks will let sellers know if they will agree to the short sale’s terms (i.e., PRICE) without a formal purchase contract but most lenders will require a contract before they get involved.  Your Florida short sale attorney will know the reputation of the lender as well as their quirks, and be able to let you know what your bank will tend to do.

4.  Can you short sale your Florida home even though you are current on your mortgage payments?

Yes.  It’s possible to short sale a Florida home with an underwater mortgage even though you haven’t missed a single mortgage payment.  The key is whether or not the lender is going to be amenable to it.  Why should the bank go for a short sale on a mortgage that is paid every month?  If your Florida attorney can negotiate with the lender, getting them to understand that they will be facing the expense of foreclosure in the future if they don’t go with the short sale option, then a short sale may be possible even though you are current on your mortgage.

5.  What are the tax implications of a short sale?

Right now, a successful Florida short sale includes getting the bank to forego the deficiency and release its right to sue the home owner for the amount left on the note after the house is sold (the “deficiency lawsuit”).  That amount is not taxed as income by the federal government if certain requirements are met.

However, as of December 31, 2012, that ends.  Starting in 2013, any amount forgiven by the bank will be considered as taxable income under the federal tax laws. Something to consider especially if you are on the fence and are thinking about a short sale.

Which is what  Barbara and Rick Borchers did when when they sold their Florida home eight years ago and paid off their mortgage.  Imagine their surprise when they got sued by Bank of America, who wasn’t even the lender involved at closing, for foreclosure on that house they sold 8 years back.

Real Estate Closings: The Title Company

What the Borchers learned was that when they sat down at that real estate closing in 2003, the title company they paid to make sure they were conveying clear title apparently made a mistake.  A big one, one that was clear for all to see in those closing documents, but which no one caught.

Seems simple enough: there was a typo, a one letter typo, on the deed.  In the legal description of the property being sold.  Instead of the deed referencing the right house, in “Bloomingdale Section R,” the deed mistakenly had the description as “Bloomingdale Section H,” which in reality was a totally different piece of real estate.

Admittedly, it was a teeny, tiny error.  One letter:  R instead of H.  No one caught it at the 2003 closing, and no one caught it as the house changed hands three more times.  Four closings in all, and no one picked it up.

Cloud on the Title Brings Florida Homeowners into Foreclosure Action Eight Years After They Sold the Home

But it was still a very big deal.  Legal descriptions in a deed are a very, very big deal under Florida law.

When the latest purchaser of the home failed to make his mortgage payments to Bank of America, the lender took steps to foreclose.  And in doing so, the lender discovered that error in the deed’s legal description of the property.

There was a cloud on the title.

So, what did Bank of America do?  It brought all of the people in the chain of title — all the way back to the Borchers – into the foreclosure lawsuit.  Which means that the Borchers now have a duty to report that they’ve been sued in all future requests for credit, etc. and this foreclosure suit will pop up on their credit reports.

Demonstration of Importance of Representation at Closings

This experience is just one more example of the importance of having experienced Florida real estate attorneys involved in closings, to go through and read all those lines of legalese, word after word.  It’s true that most home owners aren’t going to know the legal impact of a typo in a legal description on a deed, but a Florida lawyer practicing real estate law will understand the importance of this and other language in the closing documents.

What about that title company that the Borchers relied upon back in 2003?  They’ve gone out of business.  No way to hold the title company responsible for what many would argue was their mistake in the first place.  That happens a lot.

In Florida and elsewhere,  the chances are 7 to 1 that you don’t have things in order in case something happens to you, where you need someone else to make medical or health care decisions for you or worse.  Seventy percent.  That’s just scary!

For details, read our post entitled, “Year End Planning: It’s Important for Florida Baby Boomers to Have End of Life Documents That Are Valid Under Florida Law (New Poll Shows 70% Americans Do Not Have This Done).”  What documents are involved (Wills, Living Wills, Powers of Attorney, etc.) are discussed there.

Florida Baby Boomers Are An Active Bunch – All The More Reason To Get This Planning Done Now

US News and World Report recently reported on how many Americans over the age of 50 – the Baby Boomer generation – are returning to school. Particularly community college and Boomers in Florida.  For example, the article specifically includes opinion from Jerone Gamble, completion coordinator at the College of Central Florida, speaking for CCF which is one of the first “Plus 50 schools” in the country.

Baby Boomers are also traditionally drawn to South Florida as a retirement spot.  The website Florida for Boomers, covers all sorts of issues, from how to deal with Florida mosquitoes to Chinese drywall.   Retirees have lots to think about as they consider relocating to Florida – and it’s fun stuff.  Who wants to think about Florida law and end of life decisions where there are things like fishing and scuba and decorating a new condo to think about?  It’s understandable.  And it’s risky.

Baby Boomer Planning for Advancing Years – Questions to Ask Yourself Now

For some, planning for your advancing years isn’t a pleasant task, but as the old joke goes, it’s better than the alternative.   Working with a Florida probate and estate planning professional,  it doesn’t have to be that burdensome and it doesn’t have to take that much time.

You just need to stop and do it.

There may be more to consider than you think.  For example, Florida insurance laws govern the sale of long term care insurance policies to Floridians and there are many different companies that offer long term care policy packages.  These insurance policies can be a viable part of End of Life Planning, working right along side Powers of Attorney, Trusts, Life Insurance, and the like.

Many Floridians may benefit from including these long term care insurance policies in their end of life planning.  What are they?  These are insurance policies that cover the necessary expense of having health care professionals helping with normal activities of daily living like bathing, feeding, and incontinence issues.  Paying for these policies can help to protect the Baby Boomer’s retirement portfolio as well as providing invaluable personal support to family caregivers. Good things.

If you are among the 70% of Floridians Who Have No End of Life Plan in Place, Ask Yourself These Questions.

Right now, as you read this, you know that death will happen and ignoring that fact or procrastinating about handling the legal planning for it does not good for you or your loved ones.  As this new year begins, ask yourself:

1.  Who is going to be responsible for taking care of you day to day when you cannot do it physically?

2.  Where are your financial records and other important documents?  Are they safe?  Who has this information in case you aren’t able to get to it?

3.  Are your records valid under Florida law?  Are they up to date?  Is your Will current?  Read here about recent changes in Florida law that might impact your Will.

4.  Have you named responsible and caring individuals that you trust to be Executor with an Alternate?  Are you still happy with that choice?  Will Florida law respect your wishes?

5.  If you are temporarily incapacitated due to an accident or injury or health event like heart attack or stroke, do you have a plan in place with currently valid legal documents that provide for who is take on the job of paying your bills and making decisions about your medical care?

Then consider scheduling an appointment with a Florida estate planning attorney and getting a valid end of life plan in place.  It is smart to do, and it’s a real gift to yourself and your loved ones.  Just do it, Boomer!

The most important item in that article is Mr. Tuccillo’s belief that Florida banks will be more interested in approving short sales in 2012 than they have been in the past.  That’s good news to lots of Florida homeowners.  Especially those with underwater mortgages or those already opting for a strategic default.

The Short Sale Transaction and Clouds on the Title

When a home owner decides to short sell their home, their are several issues that need to be resolved.  Things like a a deficiency (and a possible judgment) down the road.  (Read more on that in our earlier discussion on deficiencies.)

Another big issue:  sitting down at the closing table and having clear title pass from the seller to the buyer. Sounds like it should be easy enough to accomplish, and the paperwork is pretty standard.

The problem that occurs at some of these real estate closing is when there is a “cloud” on the title.  A hitch.  Something in the real estate records that interferes with the seller handing over clean ownership in the property along with the keys to the front door.

If the closing goes through and the issues isn’t cleared up or removed, then the buyer takes the home “under a cloud.”  Meaning, not free and clear of liens or encumbrances.

For example, when there is foreclosure fraud the old home owner may still have an interest in the property.  The buyers took that real estate under a cloud caused, for example, by robosigning.  The bad paper work meant that the cloud was more like a tsunami — the buyer never bought the real estate at all, because the ownership of the property never properly left the original home owner.  For more, read an example in our prior post, “Buyer of Foreclosure Held Not to Have Title to Land: According to Mass Supreme Court It Remains With the Homeowner Who Lost His Home to a Bank Mortgage Foreclosure .”

Types of Clouds on the Title in Florida Real Estate

Florida law defines what a cloud on real estate title can be.  There are lots of them.  “Clouds” can be things like:

Doomed Deed: The deed fails to properly convey the property to the buyer.  See the foreclosure fraud example above.

Pesky Ex-spouse: The seller sits down at the closing table alone, but the real estate records show the house was bought when he/she was married and there’s nothing to show that the spouse has released his/her interest in the real estate.

Probate Problem: When someone dies, their property may become an “estate” asset and who gets that property will depend upon the terms of a Florida Will or Florida law.  If there’s a Will, then it controls.  If there’s not, then Florida intestacy statutes decide.  If a parent dies and the kids sell the house, thinking it’s their property to sell, a cloud on title exists because the Will or the intestacy statutes say they don’t own it (or at least they don’t own it all) or they don’t have the authority to sell it without Court approval.

Liens: When work is performed on real estate and then no one pays for it, one way that Florida law helps get that contractor paid is to allow the contractor to file a lien against the property in the real property records; then, when the property is about to be sold, the transaction cannot close until that work is paid for and the lien is released.   A similar scenario applies to tax liens.

What To Do About Clouds on Title?

Your Florida real estate attorney handling the closing or your short sale lawyer knows that conveying clearing title these days in South Florida is not a given.  Generally what happens, is that a title examiner searches the chain of title to look for any liens or encumbrances that may be out there.  If they find a problem, then it may be necessary for a Florida real estate lawyer to take steps to legally clear title, including “quieting title” under the Florida Civil Practice and Remedies Code.

Each case is different, and no two real estate title issues/closings will be exactly the same.  However, it’s good news that short sales in Florida are on the upswing and with a bit of elbow grease, title issues can be resolved efficiently for both the seller and the buyer (and since it’s a short sale, for the lender, too).