How To Deal With Your “Underwater” Property


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As the saying goes, bad things happen to good people. The housing crash that followed the real estate bubble of 2004-2007 left millions of Americans with severely depressed properties. For some, it was the thrill of trying their hand at real estate investing. For others, they simply timed the purchase of their home poorly, and ended up with a home that is worth less than what is owed to the bank. Regardless of which group you may fall into, the effects on an “underwater” property are difficult to deal with. Job transfers, growing families, divorces, etc. all mean having to deal with the headache of trying to sell a home that is worth less now, then when it was purchased. Fortunately, the banking industry has reacted to these times and there are options available to “underwater” property owners.


Loan Modification

If you are one of the many who took an interest only note, or felt pressured to take a loan when interest rates were sky high, a loan modification may be the answer for you. Loan modifications work best for those individuals who wish to remain in their home, but are struggling to keep up with their payments. Through federally backed mortgage modification programs, as well as internal lender modification programs, millions of individuals have seen their principal reduced, their interest rates reduced, or mortgages waived. The end result is that the borrower is able to remain the in the home at an affordable rate.


Short Sale

Another option available to distressed property owners is the short sale. This option works best for those who want to get out from under a property. Whether you have relocated, gotten divorced, or let an investment property go, the short sale is a great way to finally part ways with a property that has been tying you down. The short sale acts like a typical sale, except that the bank steps in at the end of the process to determine sale price and covers closing costs. A short sale is an affordable option for those who need to sell a property that does not have any equity.


Deed In Lieu

A deed in lieu of foreclosure occurs when the borrower signs a deed conveying the property to the bank. In exchange for the deed, the bank agrees to waive its right to pursue a foreclosure action against the borrower. This option works best for those who need to get rid of a property, but have been unable to sell the property. Most of the time, the bank will not entertain a deed in lieu until the property has been actively marketed as a short sale for a 3-4 month period. The reason for the bank’s reluctance is that they do not want to take on the inventory and have to care for the home. Generally, if a fair price can be obtained through the short sale, the bank will prefer that option.


Foreclosure Defense

For those individuals who have been denied a modification, short sale, or deed in lieu, or for those who simply wish to remain in the property as long as they can, foreclosure defense is a good option. A properly defended foreclosure can result in debt waivers, a longer time period in the home, and sometimes even legal fees paid out to the borrower.


It is important to note that walking away from an “underwater” property does not resolve all issues. The old adage that out of sight, out of mind does not hold true when you remain financially liable through a promissory note. One of our founding partners used to say “what you don’t know about the foreclosure process could cost you much more than your home.” Continuing liability, financial liability and credit effects are all very real issues when dealing with a foreclosure. It is imperative to get title transferred out of your name and into that of another third party to absolve yourself from future liability and the potential for further financial implications.


——Andrew Hoek



If your property is underwater and you are looking for a way out, call the experienced attorneys at DeWitt Law Firm today for a free consultation to discuss your options.

Andrew Hoek
Experienced Tampa
Real Estate Attorney

DeWitt Law Firm, P.A.
607 West Bay Street
Tampa, FL 33606
Phone: 813-251-2701
Fax: 813-251-2704