Walking away – the Right Way and the Wrong Way to Leave Your Home after a Foreclosure
by Steven R. Neuner, New Jersey attorney at law April 10, 2011
Too often, a time comes when a homeowner needs to “walk away” from a home they cannot afford, and which is usually in foreclosure. This is a lot more complex legally than it might first appear. In this article, we cover what to do, and what not to do, when the time comes to move out. Generally, there are a lot of reasons to stay in a house until the sheriff’s sale, but sometimes an earlier move-out is necessary.
Keep insurance in place until you no longer own the property. If someone is hurt on the property, or a fire or other catastrophe on your property causes injury or damage to someone else’s property, you can be sued and may be liable. Until 10 days after a Sheriff’s Sale or until the deed is no longer in your name, make sure you have insurance in place for liability claims. If the lender has obtained their own insurance (called “force-placed” insurance) these policies will not cover claims against you, only damage to the property. Even if you have already filed a bankruptcy, this will not protect you against liability for something that happens on the property after you filed. Please note, however, that once the property is vacant, most insurance starts costing a lot more.
Keep paying condominium, homeowners association, and other “common area” charges until you are no longer the owner. Even a bankruptcy will not protect you against these charges assessed or incurred after the bankruptcy filing. Any of these charges owed before you file a bankruptcy can be discharged in most cases. This is an area where specialized legal advice is important.
Shut off and get final readings on all utilities. Gas and electric service should be taken out of your name as of the day you move. You should call for a final reading, and ask for a final bill. Shut off the water at the main valve. After that, open up the lowest water tap in the house to drain water from the system to prevent freezing.
Set up postal forwarding. You can do this by going to a post office and asking for a “moving kit”. This will include a postal forwarding postcard. You should do this a few days before your move. This card needs to be mailed or delivered to your local postmaster that handled your mail at your old home.
Document the condition of the home when you moved out. Take digital rictures of the inside or outside. You may need this later for a variety of purposes.
Take all your personal and property records with you. You will likely need them.
Lock the doors and windows, and tell the lender and the local authorities. You remain responsible for the home, and can be issued a citation for local code violations (such as overgrown grass or other violations) UNLESS you take certain steps. Under New Jersey Statutes 46:10B-51, once a foreclosure has been filed, the lender is obligated or liable for any condition on the property that is a nuisance or in violation of any state or local code. So, as soon as possible AFTER you have completely moved out everything you want to keep, you need to write to the lender, the police, and the local housing code official telling them that you have moved out, that the property is vacant and abandoned, and that a foreclosure has been filed. Make sure the letter identifies the foreclosure docket number, the property address, the loan account number, and states who has the keys. We recommend you send this certified mail to the lender, lender’s attorney, local police and local housing code official. Send the keys to the lender’s attorney. Of course, keep a copy of the letter, and record the certified mail numbers for future reference. (Make sure you put your new address on the green card so you get it.). However, it does not hurt to let the lender know when you will be moving out, a few days in advance. If they want to take over the utilities etc, there is no harm in that, but you will still want to get final reads.
DO NOT strip or remove anything that is permanently attached to the property. Removing toilets, built in appliances, or anything else that is permanently attached to the property might create legal problems for you in the future.
DO NOT damage the property needlessly. See above.
Get legal advice. If you are in this situation, you should have already obtained legal advice. Just moving out is not always the end of the legal and tax issues that can arise.