Today, owing more than a home’s current market value is common. In fact, according to a study by CoreLogic, 23.1% of all residential mortgages had negative equity in March 2011. That’s 11.1 million homes – and 11.1 million homeowners wondering what to do.
If you’re in that 23.1%, you do have choices, but which is the right one?
- Should you try for a loan modification?
- Should you keep making your current payments and hope for the best?
- Should you simply stop making payments, and walk away?
- Should you offer your home as a short sale?
Loan modifications have turned into a nightmare for many homeowners – as I’m sure you’ve read. Instead of helping 3 to 4 million families, only about 600,000 have actually gotten real modifications. Others have had their credit destroyed and their emotional lives turned inside out. And then they’ve lost their houses.
Keeping on with the payments is the safest – if you plan to stay in the community and can afford the payments. But of course, you may have to wait years before the house is once again worth what you owe.
Walking away appears to be easiest, but it can come back to bite you. Your credit will be shot, and you run the risk of your lender suing you for a deficiency. If you’re not familiar with the term, a deficiency is the difference between what you owed and what they realize after all costs when they re-sell the house. Plus, you won’t be eligible for a new mortgage loan for 5 to 7 years.
Note: In California, this should read “suing you for a deficiency on any second mortgage you may have. A deficiency is the difference…"
A short sale takes more effort, but is easier on your credit and you’ll be eligible for a new loan in just two years. In addition, when properly negotiated, you’ll walk away owing little or nothing on a deficiency.
If you’d like to know more about short sales and how they work, get in touch. I’ll be glad to explain what’s required of you, and how we work with your lender to lift the mortgage burden from your shoulders.
Note: If you do not do short sales, find out who is the best in your community, then use the following instead of the previous sentence: “I don’t specialize in short sales, but I will be happy to recommend an agent with an impressive track record for closing short sales.” This can at least get you a referral fee!
Who you choose to list your short sale is important. When handled properly, short sales are time-consuming, but they close. When handled improperly, you’ll wait months and could go into foreclosure before the bank even answers your request.
Please let me know how I can help you. I’ll be happy to provide a no-obligation market analysis on your house, to send you my Guide to Homeselling, or to discuss your selling options with you.
You can reach me by calling 858-342-9292 or writing to firstname.lastname@example.org.
P.S. If you aren’t planning to sell right now but would still like to know what’s going on in our local market, get in touch. I’ll be happy to visit with you.