March, 2011:

What is the “due on sale clause” in my mortgage?”

The due on sale clause in today’s mortgages basically states that if you sell or transfer all or any part of your interest in the property without your lender’s prior written consent, the lender (at lender’s option) may declare you in default and require immediate payment in full of your entire mortgage balance. Even a lease option is considered transfer of interest and would trigger the due on sale or acceleration clause. 

There have been recent cases in which property owners have sold their homes to a “holding company” for some paltry, insignificant sum (perhaps $10 or so) in which the holding company agrees to be responsible for the future mortgage payments. The holding company charges the owner a fee of several thousand dollars for the privilege and then fails to make the payments.
As there are few (if any) mortgages today that are freely assumable, owners in such situations are almost certainly in violation of their mortgage agreements and will face foreclosure.

Can I do a deed in lieu of foreclosure instead of a short sale? How does that work?

A deed-in-lieu is sometimes considered by a lender instead of a foreclosure if the lender believes that doing so would result in less financial loss to them. Such may be the case if the property’s value and mortgage balance are similar. Properties with second mortgages and/or large unpaid assessments and/or judgments are not typically good candidates. 

The good news is that in the case of a deed-in-lieu, the lender will likely agree to not pursue you for a deficiency later, regardless how much loss they eventually suffer on the deal. Otherwise, (at least in Florida) a lender would have up to five years to pursue you. Your credit score will of course be negatively impacted, and it will be extremely difficult for you to obtain a home loan for a minimum of two years after the fact.

I made an offer on a house asking the owner for a seller’s disclosure. The seller refuses to provide one. Isn’t this legally required?

In Florida, a seller is not legally obliged to provide a real property disclosure to prospective buyers. However, a seller is legally required to disclose known facts that materially affect the value of the property. In some situations, a seller may be unable to provide disclosures, such as that of a trustee owned or bank owned property. Your sales contract should always provide for thorough home inspections prior to closing.