A View into the Fuzzy Mind of a Distressed Property Owner

Many people who seek assistance for legal troubles are facing problems in other areas of their lives as well. Often those troubles are financial and result in their home being at risk of foreclosure.

As Realtors with a collective two decades of working with distressed homeowners, we’ve seen certain patterns in our clients. Often, because of the enormity of the problems faced, they may choose to ignore the escalating issue of missed house payments and bank notices. They engage in magical thinking, hoping it will go away by itself or that the solution is right around the corner: Maybe their brother-in-law, who has owed them money for 10 years, will pay up or the bank will agree to a modification without qualifying income, etc.


Judge Dan Hinde

Financially distressed individuals also face a mountain of shame. Many do not want to talk about their growing problem of missed mortgage payments because they don’t want to consider the possibility they could lose their home. They are embarrassed by what the neighbors will think to see their foreclosed home on the block. They are concerned they will be topics of neighborhood gossip, and their children may face ridicule or bullying at school. Yet they are frozen and don’t know where to turn for professional, non-judgmental advice.

People who are faced with the financial problem of missed mortgage payments need to speak with a professional Realtor who can help them analyze their situation and determine their options. If they are also facing issues such as bankruptcy or divorce, working with a Realtor will take the burden of worry about their home off their shoulders. Many homeowners may not be aware they actually have equity in their home in the current market. Those who do, may not know how to access their equity in the face of impending foreclosure. By working with a Realtor, skilled in bringing a property to market and executing a sale quickly and efficiently, they will be able to benefit from that equity.

Solutions are also available for homeowners without equity. Most delinquent borrowers are eligible for a short sale. In a short sale transaction, the seller’s lender agrees to sell the house for less than the payoff amount. The lender provides a written agreement which states the contract amount will be accepted as payment in full and the seller will not be pursued for the deficiency once the transaction is closed.



A short sale allows a homeowner a dignified transition from their home as compared to the stigma of foreclosure. Many of their neighbors never know the property was sold as a short sale. Most short sales allow the seller to receive a relocation incentive, typically from $1000-$3000, as part of the transaction. This payment assists the sellers as they transition to their next phase in life.

Homeowners in financial distress can face additional challenges when selling their property. They may have judgments or additional liens against their property from unpaid creditors, or even the IRS. They may have multiple mortgages, a home equity lien or a homeowner association lien. These homeowners in particular require the expertise of a Realtor who is a seasoned distressed property expert. The issues are not insurmountable, but require a knowledgeable expert who can successfully navigate the hurdles.

An attorney whose client can no longer afford their property is able to assist the client by understanding their needs and referring them to the appropriate real estate professional. Even a client who is financially protected by bankruptcy may feel overwhelming shame and humiliation to just walk away or give their house back to the bank. It may be better for the client’s overall mental and emotional well-being to retain their personal pride by selling the property in a dignified manner once it is released from bankruptcy protection.

In a divorce situation, avoiding foreclosure by choosing a short sale allows the party remaining in the home a period ranging from four to six months or more to pack, save money and prepare their family members for the upcoming transition. This gift of time can help to ease the stress resulting from one of the most overwhelming challenges life can present to a family. Often, this type of sensitivity to an unstated need can spotlight areas where top notch firms rise above the rest.

Consider the referral of a qualified and experienced Realtor as your “secret weapon” the next time a client needs to dispose of a distressed property. Your client will have one less worry as they focus on working with you to resolve their remaining legal challenges.  Brenda Houghton and Diana Squires

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