By: Ilyce Glink and Samuel Tamkin
Q: I am separated from my husband. I live in the house, but he doesn’t. I am on the title to the home, but he is on the mortgage. I will be moving soon. Can I sell the house without him being a part of the process? The home is underwater and I recently filed for bankruptcy. What are my options?
A: Your choices might be limited on your underwater home. While you own the home, the home has no equity. Furthermore, if you try to sell the home, you will either have to come up with money to sell it or have to work with the lender to get the lender’s approval on the sale.
As you have filed for bankruptcy, it would seem that you don’t have enough money to pay off a mortgage on the current home when it sells. And with the divorce, as the owner of the home but not the borrower on the home, you probably won’t have the ability to work with the lender to allow to get the approval on the short sale.
Your husband is the borrower and any questions, issues or solutions relating to the mortgage loan have to go through your husband. When, and if, you call the lender, the company representative will want to speak to the borrower. You’re not the borrower so you’ll hit a dead end there.
You can try to work with your husband to get the home sold. Your husband would have to provide documentation to the lender to show that he doesn’t have the money for any shortage upon the sale of the home. If your husband is unwilling to cooperate on the sale of the home, you may have a difficult time selling it. If your home had equity, you could simply sell the home, pay off the existing loan and take whatever money you got from the sale and move on.
You have one additional problem: You filed for bankruptcy and anything you do will require the approval of the bankruptcy court. The home that is in your name is an asset of the estate in bankruptcy. That would mean that the disposition of the underwater home involves another layer of approvals.
You can call your lender and see if there are suggestions for options that would work. If every possible solution requires your husband to become involved, you’ll know you have to bring him into the deal. If you can’t bring him in or he won’t cooperate with you, you’ll be out of luck. You might have to stop making payments, let the bankruptcy court decide the disposition of the home and move on.
Your husband will have to bear in mind that any failure to make payments on the loan will affect his credit and credit score. It will be in his best interest to make sure the home gets sold, even if the sale is through a short sale. Selling the home yourself will probably will get a better price for the home than if the home goes into foreclosure and the bank sells it off.
When you sell in a short sale or the bank forecloses and then sells the home, the bank is left holding the bag and short of funds to pay off the loan in full. That deficiency usually is still the borrower’s responsibility. In states that allow deficiency judgments, the bank can still go after the borrower for that money. We’re hearing of more and more lenders requiring borrowers to come up with money at the closing to allow a short sale and lenders looking to the buyers for the deficiency.
If you limit the damages and sell in a short sale, your husband might have a better chance of getting a better deal with the bank or even have the bank waive the requirement to repay any of the balance owed on the loan.