Homeowners must make plan to avoid quicksand of foreclosure

As kids, we sat in front of the television wide-eyed with anticipation of how the hero would escape their predicament and live to see another day.

One of those suspenseful scenes from the 1980s was in “The Neverending Story.” The specific scene that is ingrained in a lot of people’s minds was when Atreyu’s horse, Artax, was unable to escape the quicksand of the Swamps of Sadness, and ultimately descended to his death. The audience was in shock. How could this be possible? Good is always supposed to prevail over evil.

But once you are stuck in quicksand the harder you fight, the more you sink.

The foreclosure process is a lot like quicksand. Once homeowners are sued, they can fight and fight, but each passing day, they incur late fees, interest, and attorney’s fees and costs. Before they know it, they owe thousands more than before the foreclosure action began.

During the housing market crash in 2008, many homeowners did not worry about the damage to their loan balances. They had no equity in their homes. Homeowners from Miami to Tallahassee hoped their attorneys would find a legal way out or at least buy them time to stay in their homes as long as possible. Some of these foreclosure actions were litigated for years.

But today’s housing market is dramatically different. Many homeowners have significant equity in their properties, giving them powerful options. Now, homeowners have equity to lose as they struggle with property taxes, rising insurance premiums and, until recently, significant inflation. Many Floridians have the difficult task monthly of deciding which bills must be paid and which bills can be temporarily avoided.

For example, condominium owners – in addition to skyrocketing insurance premiums which have been causing an increase in assessments – are also dealing with the new inspection requirements resulting from legislation enacted after the Surfside condominium collapse. The “milestone” inspections are extremely expensive, and older buildings, after troublesome inspections, must be brought into compliance. These factors, along with new reserve fund requirements, are causing an exponential increase in condominium owners’ regular and special assessments.

For condominium owners who also have mortgages, these increases are forcing many of them to decide between paying the bank or the association. Since both the bank and the association can foreclose on units, it is common for owners to stop paying the bank first. If they were to stop paying the association, unit owners might have restrictions placed on the use of common areas during the association’s foreclosure action.

Given the equity that many homeowners now have in their properties, the litigation strategy of the past no longer makes sense. In today’s real estate market, more options are on the table than were available during the housing market crash in 2008. Now merely buying time through extensive litigation will cause a significant increase in loan balances and a corresponding decrease in equity. For individuals who are currently employed and want to retain ownership of their home after being served with a foreclosure complaint, one possible retention option available is applying for and receiving a loan modification.

In situations where homeowners fail to qualify for a loan modification, they can sell their properties and invest the sale proceeds into something more affordable. It is always better to make a timely decision to sell if homeowners want to maximize their profits, especially in a dynamic real estate market.

Unfortunately, life sometimes throws curveballs (e.g., global pandemics) and foreclosure may be unavoidable. For those who are knee-deep in the murky waters of overwhelming debt, decisions can be made now that will drastically improve your financial situation for years to come.

You are the hero of your story, and you can choose how you want the story to end.

David Miller is the managing partner of David Miller Law, PLLC in Largo.