Thursday, January 14, 2010

Collections, Charge Off Required to Approve Short Sale - Part 1

If you are trying to sell  your home as a short sale and waiting for an approval from a lender, you may get a condition from at least one of them saying that they will approve the short sale but you agree that they will charge off the remaining balance and submit that amount to 3rd party collectors because you are still going to be held liable for what you didn't pay off.  Pretty crappy since the banks got multiple bailouts already.  They are so greedy. 

I have encountered this situation with 2 of my listings already and I'm expecting it with all the new short sale listings I put under contract.  This can be very frustrating for the seller and scary, because, there's already a hardship trying to pay that mortgage. So to be out of a house and still have to pay the dang thing is just ridiculous and unfair. 

I know there are a lot of folks out there that like to say that everyone is responsible to pay their debts.  I only half heartedly agree with that.  I agree when it comes to real services you've received, but I don't when it comes to credit cards and bank loans.

I've stated before in other posts that banks do not lend you their money. They are creating the money and credit out of thin air by monetizing your signature.  This is the first reason I don't agree with having to pay them back, because your signature funded the loan.

When it comes to credit cards, the second reason I don't agree to paying them back is because it is a unilateral contract which is null and void. This is according to the constitution. A unilateral contract means that only 1 party is at risk, and you can bet your last pair of underwear that it ain't the bank or finance company that has the risk. They didn't fund the credit, they have nothing to lose. Your signature did and your peace of mind, wallet and credit standing is at risk. In order to be a valid contract, all parties to the contract have to carry risk. Therefore, a unilateral contract is void and unenforceable.

So how does this relate to what banks are doing to short sellers?  Well, I said it's not fair because they got bailouts and should pass the good will on. Heck, we're funding their bailouts already. But, do you say fine, just foreclose then, because then you can't come after me with collections or do you sign that grimy piece of paper?

I have told my clients that they should go ahead and sign the paper. A short sale is much better on your credit than a foreclosure. Plus, that balance is going where you want it to - to a collection firm. Now, you should know by now that that collector is going to get a file for this account so they can use it against you, report to the bureaus against you and start with the harassing phone calls and letters. 

Why is this a good thing? Because the file they get does not have every thing they need to validate the account when you challenge it.  This means that you will be able to remove that collection account from your credit and get them off your back.  This means that you can start racking up violations against them and if you decide to play the game on your terms, you can make some money.

Collectors violate the law, that's a given. Use the FDCPA and FCRA to track the violations. Most are worth a thousand bucks each. When they rack up enough to satisfy you, you can either use it as a bartering chip or sue them and pocket the winnings. Either way, you will get it off your credit report.

See part 2 for how to beat them in their game!

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