Your Ticket to Freedom
Even though there are signs of a housing recovery, millions of people are still experiencing the threat of foreclosure. If you are one of them, there are steps you can take to avoid a foreclosure. Here are some of the most common:
Let’s say your hardship was temporary and the situation resolved. If you can make a one-time payment that includes all missing payments, legal fees and late fees, you are eligible to be reinstated back into your loan agreement.
Forbearance or Repayment Plan
If your hardship was temporary, but you cannot afford a reinstatement, you may be able to pay the missed payments over time, or the payments can be placed at the end of the scheduled loan amortization.
Rent the Property
Renting the home might allow you to pay your mortgage, homeowners dues and property taxes.
You may be eligible to modify the loan by reducing your principal or lowering payments. Programs very from bank to bank.
If you are eligible, refinancing might allow you to get more affordable payments.
Bankruptcy may stop foreclosure and allow you to reorganize your debt. However, this is a temporary measure, and if you are still unable to make payments, the foreclosure will eventually occur. Bankruptcy also makes a property much more difficult to sell.
You sell the property for less than your mortgage, and the bank agrees to release you from your obligation on the remainder of the loan. In some cases, you are able to walk away from the loan free and clear.
Why Would a Bank Accept a Short Sale?
In today’s market, banks will often be glad to accept a short sale as an alternative to foreclosure. Here are three reasons:
1. In a short sale, the bank never owns the home. It may seem obvious, but this is one of the major reasons banks prefer short sales. Having to take the home back and then sell it at auction is a major undertaking that can be expensive. In a short sale, there is already a buyer in place.
2. In short sales, the home is generally in better condition. It is a sad fact that when people are about to lose their home to foreclosure, they stop maintaining the home, making it harder to sell. In a short sale, the seller benefits from selling the home, so is generally more responsible and cooperative.
3. In a short sale, the bank gets more money. Ultimately, this is the biggest reason a bank is willing to accept a short sale. Even though they are not getting the full amount owed, they will almost always net more than they would by selling it at a foreclosure auction. In 2011, even the most qualified loans (prime loans) resulted in a 49%-54% loss at auction. With short sales, the losses are typically 25% or less and the process is much quicker.
One of the Most Important Things to Know
The sooner help is sought, the more options are available, and the greater chance of success.
As a real estate professional who has earned the Certified Distressed Property Expert (CDPE) designation, my mission is to provide financially strapped homeowners with alternatives to foreclosure, help them steer clear of scams, and assist them in finding the solution that best meets their needs.
These are tough times, but more help is available than ever before. If you or someone you care about needs freedom from the frustration of a mortgage they can’t pay, contact me today and let’s get started.