What Are My Options

The homes across the country are coming down in prices as things progress in one of the worst real estate markets this country has ever seen.  It is anyone’s guess when values are going to begin to recover.  In the meantime, many homeowners across the country are faced with numerous difficult decisions.

Homeowners have six choices to consider when they need to sell or can no longer afford to remain in their homes.  Of course all choices should be discussed with an attorney

1.  Modify the Mortgage.

2.  Come to close with the cash shortage.

3.  Sell the property on a short sale basis.

4.  Rent your home for the time being in an attempt to cover as much of the monthly burden as possible and sell once market values have recovered to a point where you can afford to sell your home.

5.  Walk away and let the bank foreclose.  This is never a good option, especially if you have more than one mortgage.  The second mortgagor would file a judgment against you and force you into bankruptcy.

6.  File bankruptcy and include all debt, including the house, in the bankruptcy. 

Mortgage Modification plans only decrease payments (they usually don't reduce principle balances) and are extremely difficult to get approved.  Additionally, they usually only work on the first mortgage.  As of February 2010, approximately 120,000 have been approved nationwide.  The federal government had hoped that this plan would have helped millions of homeowners, but the banks have not been cooperative to make this happen for the majority of homeowners who have tried.

In many cases, the best option for property owners is a short sale.  This is now being looked at more by the federal government as the best solution to keep home prices from further diving as foreclosures continue to occur on a record scale.  Washington officials are considering offering an incentive of $1,500 to sellers who short sale - to be considered as relocation assistance.  They want to encourage short sales over foreclosures.  Short sales sell at a higher price than foreclosed homes, the credit hit to the seller is less damaging than a foreclosure (thus placing the seller in the home buying arena sooner rather than later), and the home’s condition is better maintained.    

A short sale is basically a plan where the lender/s will approve a sale that is less than the amount owed.   To qualify, the sale price must fall within the sold comparable range in the home’s area, a hardship need be present, and the sellers must not have access to other liquid assets such as other real estate with  high equity value, large sums of cash, etc (retirement money does not count as an asset).  Upon an approved sale and close, the unpaid debt is written off and you, as the seller, are released from this debt.  For many, this is $75K+ and often times this forgiven debt is NOT considered taxable income.  All of these issues should be discussed and investigated with an attorney.  For many homes, we will no longer list them without an attorney file review. 

We work with an attorney group who has successfully negotiated over 100 plus short sale files per year.  Our negotiator will meet with you to discuss the short sale option and preview your file to see if this is a good option for you.  If he thinks you are a good candidate for a short sale, we would then proceed to list your home.  The average time from List to Close is approx 5-6 months, allowing you time to make alternative living plans.  

The downside of a short sale is it does affect your credit rating and you would be unable to purchase another home, in most cases, for 3 years.  You would need to rent or purchase on Contract for Deed, which is a rare find these days. 

If you decide renting your house is the best option, we offer property management services to take away the headache and hassle.  Given the current market conditions, there are more qualified renters than ever; people needing to rent for a term before they are once again in a position to purchase.  If you feel a short sale is your best option, chances are that you will be in a similar position; needing to rent for a term before purchasing again. 

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