Exploring Your Alternatives

Things are really heating up in the Ginndom. Unfortunately, most owners do not have a clue what their options are. Many owners are not paying club dues, POA, or even their mortgage. Some can no longer afford to pay, while others have simply reached the end of their rope and refuse to throw more good money after bad.

I am not looking at being a moralist here. Not a week goes by that I don't hear a story about some owner being driven into bankruptcy trying to meet his or her obligations with respect to their Ginn property. Most are angry. They feel they have been duped and lied to. Simply, this is far worse that what is going on in the rest of the economy (Florida properties are down an average of 25-35% while Ginn properties are down as much as 90% - if one can sell at all).

Altough there are many considerations in deciding what to pay and what not to pay (which I will not get into) it comes down to a personal decision. I will never suggest that someone not pay a just bill but, let's face it, if the kids are starving, your decision is obvious. I cannot possibly agree with one raiding his retirement money or kid's education fund just to try and keep an already worthless piece of property. Also, the idea that "I will try and make a few more payments and then see what happens" is only posponing the inevitable and throwing money in the garbage.

I am in no way suggesting what you do - only that you make a decision. Passivity will lead to the poorhouse. Do not allow a bad decision to get worse. There are only 2 choices: 1. Keep paying your mortgage (the other fees are a separate conversation), or 2. stop paying now.

The problem is that too many do not know what to do. This indecision (or automatic deduction from your account) allows one to blindly continue until all their money is used up - and then what??

The difficulty of the owner's decision here is compounded by the ridiculously onerous carrying costs - club dues, taxes and POA fees - all of which must be factored in. Unfortunately, the economics are vastly different from that of a single family house, for example, if we were trying to "weather the storm" and hold on for a few more years. Everyone has to do their own math.

What are the alternatives?

By now, everyone has heard the litany of options recited by the bank or their realtor - loan modification, short sale, deed in lieu of foreclosure or, if you do nothing, foreclosure.

The short sale involves getting an offer and presenting it to the bank. I speak with owners who have had their properties listed for a year or more - with no offers. But what they do not understand is that the bank would probably not accept the offer the property is being listed for anyway! You have a half million dollar mortgage and you're frustrated that you can't even get one lousy offer at that very reasonable $100,000 price that you and your realtor decided to list it at. But you're wasting your time. You're putting the cart before the horse. The lender is unlikely to accept the offer anyway!

What really puts the kabosh on the deal is when an investor (or his broker, etc.) goes to the lender's loss mitigation department with "hat in hand" and has to show two years tax returns, financial statements, bank statements and W2's. Let's face it. If the investor does have assets, now the deal is definitely not happening - and he has just given all of this sensitive financial information to his creditor (that is, the lender who is requesting all of your sensitive information while, at the same time, planning to sue you). This does not make sense.

Finally, most have read about the auctions (or, more properly, the attempt at auctions). Sounds like a reasonable approach for the desperate owner. But how does this play out? And I don't mean the part about there being no bids. What if the auctioneer actually succeeded and received a decent bid of, let's say, $150,000 for that Tesoro property that has a mortgage on it for $500,000. Does the owner know if the lender is willing to forgive the $350,000 that the property is upside down? Or is that owner preparing to pay the deficiency out of his own pocket? So, this owner paid some $10,000 (so I am told) for the privilege of being in the auction without even knowing that the mortgage would be satisfied - even if he did get the offer he was looking for.

I thought the Ginn deal was bad enough. It seems that the advice owners have been receiving in their frustration to deal with the problem is even worse. More tomorrow.