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When Should a Home Owner Consider a Short Sale?

February 12, 2012
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Tips for Underwater  Home Owners Who Want to Avoid Foreclosure

by Jeff Donnellan RE/MAX

The US is beginning its 6th straight year of declining home values.  Like myself, 10 million home owners are underwater on their mortgages.  This is not always a problem if there is a long term solution like waiting out the market or renting your home until the mortgage is paid off or values return.  Many home owners that have experienced a hardship like loss of income, wage reduction, increased bills, death of a family member or divorce time is working against them.  They can’t wait out the market until it gets better, they need a solution now.  Most people in these situation are at the end of their rope and savings accounts are running dry.  Now is the time to find out what solution is best, refinance, mortgage modification or short sale.

Here are a 10 tips for home owners who owe more than what their home is worth and they don’t know what to do.

1.  BEWARE of foreclosure prevention scams.  Many unscrupulous people prey on distressed home owners at their moment of weakness.   Never agree to up front fees.  Check credentials and ask for referrals.

2. Be realistic. If you’re spending more than you make each month or have a hardship now or foreseeable future take action now that could prevent defaulting on your mortgage and bills later on.  Ignoring the problem will only make it worse.

3. Must ask the question can I (we) or do we want to stay in the home?  Be honest with yourself.

4.  Seek out information. My website is filled with information to help home owners.  www.webhomesearcher.com

5. Contact your bank and specialists like a Short Sale Realtor, Short Sale Attorney, Mortgage broker.  Each will be able to help you discover all possible options. Banks are more willing now than ever to keep people in their home instead of foreclosing.

6.  Government sponsored programs such as HAMP (mortgage modifications), HARP ( refinance), & HAFA (short sale 3k to home owner for moving expenses) are available to struggling home owners.  Use these programs while they are still available.

7. A Short sale is not the end of the world.  It’s a practical solution to a difficult situation.  No cost to home owner. Credit scores can be affected as little as 50 points, better than foreclosure on credit report and can qualify for a new home mortgage in as little as 2 years and can negotiate away the deficiency ( difference between amount sold and amount owed).

8.   In some cases renting the home is possible if rent prices meet or exceed mortgage payments.  This can be a risk as well because if the tenant doesn’t pay mortgage payments will be missed.

9.  Consider what is best for your short term and long term future.  A foreclosure can stay on your record for 10 years and could prevent purchasing a home again for up to 7 years.

10.  Some banks are offering up to $35000 for home owners to complete a short sale instead of letting the home go into foreclosure.  Contact your bank to see if there are incentives.

My best advice is to meet the problem head on.  The longer  a home owner waits to take action the fewer options will be available.  I have often been contact when there is only 1 month left until a home forecloses and there is very little that can be done to save a home owner.  In contrast when I’m contacted early in the process all options are available.  This process can be scary &  frustrating, but in the long run will benefit your financial future.

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Is Your Mortgage Weighing you Down? Short Sale v.s. Foreclosure

February 3, 2012
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What Home Owners Need to Know about Avoiding Foreclosure

By Jeff Donnellan RE/MAX

25% of Home Owners are underwater on their mortgage due to 5 straight years of home price declines and home prices have reverted back to 2001-2002 values in most markets.  This means that anyone who  has purchased a home in that time & didn’t make a large down payment owes more than what their home is worth.  During this time  many Americans have lost their job, experienced wage reduction or other hardships that made paying their mortgage extremely difficult.  This is nothing to be ashamed of because most people in this situation spend all of their savings just trying to keep their home.

Our neighbors are suffering in silence. 1 out of every 7 homes in the U.S. is in some state of foreclosure.  7 out of 10 do absolutely nothing about it.  It doesn’t have to be so.  Their are foreclosure alternatives such as a short sale, renting the home or a deed-in-lieu.  A foreclosure is an extremely traumatic event for a family and the worst thing that can affect your credit score (worse than bankruptcy).

Reason Against Foreclosure

  • A foreclosure is worse than bankruptcy
  • A foreclosure is public record for 10 years
  • A foreclosure could jeopardize future employment because employers check credit.

Reasons for a Short Sale

  • Home owner is in control of the selling process, allowed to sell and move with dignity
  • Less impact on credit score. Can drop as little as 50 points v.s. foreclosure 300 or more
  • Owner can qualify for another mortgage in 2-3 years, 7-10 after a forclosure
  • Short sale will be recorded as ” Paid in Full” or “Settled”
  • Owner can receive up to 3K to moving expenses under HAFA guide lines

Most mortgage companies and banks are now more cooperative than ever by participating in programs such as HARP, HAFA, & HAMP.  These programs are meant to help home owners  refinance or modify their mortgage and stay in their home or short sell their home if the hardship is too great.  In a previous blog  Why Would Your Bank Accept a Short Sale I detailed why banks don’t want to foreclose and how they are trying to help home owners relieve the burden of a mortgage they just can’t afford.

To find the best option contact an experienced short sale Realtor.  Since each person has a different situation, an experienced short sale Realtor can make recommendations what is best for you.

This Article was written by Jeff Donnellan RE/MAX CDPE (Certified Distressed Property Expert).  Find more information about Foreclosure prevention and short sales at www.webhomesearcher.com