As a three-time certified Short Sale “Specialist,” my specialty is helping struggling home owners avoid foreclosure. If you’re upside down on your home and you need to make a move you essentially have 7 options to choose from. More often than not people find that a short sale is ultimately their best solution, however, it’s important that you educate yourself on all of your available options before choosing which is best for you. If you have questions about how all of this might apply to you, please feel free to give me a call and set up a consultation. I’m more than happy to discuss your unique situation in person.
Your 7 Options to Choose From Are:
- Pay down your mortgage, and sell the property. This is an option if you have money to spare. We can sell your home and you pay the difference between what your house sells for and what you owe your lender(s). The positive to this is you can keep your credit intact. The negative is that you need disposable dollars to do this with.
- Short Sale your property. A short sale is where we sell your home for less than what you owe. We need to negotiate with your lender(s) to accept less than what you owe. Note: There can be tax ramifications depending on if you have a recourse or non-recourse loan. I can explain the difference if you give me a call. The positive is that you can pay off your loan(s) without any money out of your pocket. It’s important to realize that in the state of California, there is a law in place (SB458) that protects the home owner from any further recourse/liability once the lender(s) have accepted a short sale, AND you cannot be required to provide a cash contribution as a condition of acceptance of your short sale. The negative depends on how many payments you missed. It can reduce your credit score 50-150 points.*
- Walk Away and allow your property to be foreclosed. This is a situation where you just walk away from your house. You can still have negative tax consequences and it can affect your credit by approximately 250 points. In most cases, a short sale is a better option.*
- Bankruptcy. Sometimes you will be advised to file bankruptcy. In a lot of cases, people will suggest this because they do not know about other options as mentioned above. This should be a last resort. It can affect your credit by approximately 400 points and your credit for for the long-term.*
- Deed in Lieu of Foreclosure. This is a situation where you basically hand the keys over to your lender. In most cases, the last thing your lender wants is the property back, and if they do, it is normally prior to foreclosure. At this point, your credit is probably already negatively affected by multiple missed payments. If you were current with your payments, why would your lender take the property back?
- Loan Modification with your Lender. This is a situation where you want to stay in your property, but can’t afford your current payment(s). The lender might renegotiate interest rates or reduce your payment and add it on to the back end of your loan.
- Rent. You can rent your property out until the market turns upwards. In most cases, there will be a negative between the rent you’re able to collect and your loan payment(s). Most of the experts feel this market will take 2-4 years to turn-around, though I feel those figures may be overly optimistic. You should be prepared to rent out your property long term and create a budget worksheet to see if you can realistically afford to be compensating for the difference in your mortgage in addition to the cost of rent for your own home stead.
*Reductions to credit scores are estimates only. Individual situations will produce varying results.
From the first time home buyer to the savvy investor – from the seller with equity to the seller underwater and needing options – I am here for you.