Would You Keep Your Home If The Bank Lowered Your Payments?

This is one of the first questions I ask a potential short sale client.

I will not lead a homeowner down a short sale path if there is a possibility they can keep their home AND they actually want to stay in the home.

If the sellers are committed to keeping their home, I strongly encourage them to pursue all avenues to get a loan modification.

Most sellers reply that they’re done with the house and with the struggle. The bank would have to dramatically slash their payments, and even then it would many years for the house value to catch up with what what’s owed.

The many reasons I have heard:

1. They are tired of dealing with the banks.

• Exploding ARM’s
• Loan modifications that raise the payments
• Banks refusing payments
• Banks demanding large lump sums to initiate the loan modification agreement

2. Divorce – the house is not part of the life plan anymore and house values have plummeted tens of thousands or hundreds of thousands of dollars.

3. Job loss or job reduction – the money isn’t there any more.

4. Illness or injury – the owner is in survival mode. The house and the high house payment are not part of the survival plan. Priority is given to staying alive, taking care of a sick child, paying medical bills.

5. Relocation – for job, education, medical reasons, for personal or family safety.

6. Military training or deployment – when you have to go, you have to go. We owe a debt of gratitude to all our military who are sacrificing and taking personal risks for our nation’s freedom.

7. The house is a maintenance money pit – even if the bank would modify the loan, the house would continue to bleed money. The owner has no cash reserves.

8. A variety of other overwhelming life events

Homeowners are tired of living on the edge

Even with a loan modification, homeowners are worried that they’ll be living on the edge for 5 to 10 years until they can sell the house to pay off the mortgage. In the meantime, if the kids need braces, the furnace goes out or the car needs repair, they’ll default on their modified loan all over again.

Values have plummeted, at no fault of hard working Americans. Borrowers are exhausted and need relief. If a loan modification is not the solution, a short sale often provides that relief.