These are trying times indeed! It seems like that this all we hear about. Many people have been caught up in this mess. There is plenty of blame to go around, but that won’t help anybody in trouble. What will is a little basic information so people know their options, before the bank decides for them! All too often, we are hesitant to call on someone to help, especially when it comes to financial matters. The consequences of not doing anything or waiting too long can be unpleasant, and unnecessarily so.
So here goes! Before you are late on your mortgage payment, call a real estate professional (get a referral ideally) and discuss your unique situation to come up with the best solution. There are 3 basic options, listed from best to worst:
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Loan modification
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Short Sale
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Foreclosure
A real estate professional with expertise in these areas will start ideally by negotiating with the bank to modify the loan in order for you to be to afford to keep making the payments and keep your home-this may consist of modifying the loan amount, interest rate, or stopping the payment from adjusting up. If the bank won’t do this and you can’t make the payments anyway, a short sale might be the answer, where the bank will accept less than what is owed on the loan. Your real estate professional will handle the sale much like a regular real estate listing, except this requires more expertise in negotiating with the bank as well as potential buyers. This can result in an adverse affect on your credit, although many times it is possible to get the bank to report a short sale as ‘paid as agreed’ to the credit bureaus, thus not affecting your credit rating much. Finally, if the bank won’t accept a short sale and chooses to move to foreclosure proceedings, it will stay on your credit report for up to 10 years, greatly affecting your ability to secure financing in general. After 2 years of clean credit history following a foreclosure, you will usually be able to get a mortgage again, although because of this mortgage mess lenders are understandably extra leery of the foreclosure word!!! Sometimes filing bankruptcy can make sense as part of getting through financial difficulties-Consult a reputable bankruptcy attorney on this.
A good real estate professional specializing in this area will outline to the bank their options in resolving the problem, in their perspective (how much will they recover with a shortsale versus a foreclosure, and also how by modifying the loan terms they could mitigate their loss even better). This is all displayed in a simple effective manner in their language (numbers, sales comparisons, net recoverable dollars) and followed through with tenacity!
Your real estate professional will have you sign a ‘do not contact by phone’ form so you won’t be bothered by the bank hounding you! You will be dealing with your agent only, not the bank. Your agent will be dealing with the bank! This way you can concentrate on moving onward and upward.
The silver lining? Real estate is cyclical-what goes up comes down and vice versa. If you can save your credit you will be able to participate in the next up cycle. In the last 40 years california real estate appreciation has averaged around 8% annually. Add to that the ability to leverage financing (20% down equals multiplying your money power by 5 times), you should average 40% return on your money! Hard to beat that!!!
If you are already late on payments, a short sale is still an option and you can stay in your home in the meantime also
