If your living in California and are a homeowner the odds are pretty high that your equity has decreased. Riverside and San Bernardino County…( The Inland Empire ) is devastated with property values declining 50% and higher. The decline in home values are down right scary.
For many, a loan modification was or may be a solution to keeping the property. For most of our clients that dream was shattered when President Obama rolled out the guidelines for qualification of a loan modification.
A home can not be “too upside down” in equity - “underwater” basically if you live in California a loan modification may work in lowering your monthly payment - but the decision is to keep a home that is declining in value at the speed of light is another concern.
Take some time to really evaluate your personal situation. If your considering a loan modification versus a Short Sale, have your real estate agent provide you with what your house would sell for today. Then what the projected decrease in value in the next two years will be.
Most loan modifications that we have negotiated will work within a 5 to 10 year plan to help lower your payments. With that said, if you want to sell the home after that period of time you may face negative equity. If the home fits your needs long term and you don’t mind that your going to owe a lot more on the home than you could ever sell it for, loan modification will most likely help you.
It takes 35 to 90 days of working with your lender, just make sure that if you are not doing the paperwork yourself and directly communicating with your lender you choose a reputable company to represent you. Keep in touch with them and make sure you know what is happening every step of the process.
We as Short Sale Specialists see a lot, I’ve got my own thoughts on the value of loan modifications in areas like the Inland Empire….or any other area that home values are spiraling down with no end in sight.
As we drove through a beautiful housing community yesterday to put a lock box on the door of a new Short Sale listing my stomach wrenched with pain as I counted the homes that had been foreclosed on or had for sale signs in yards of the obviously vacant homes. There were children playing outside, cars in driveways with pretty flowers in green yards but they were overshadowed by the empty homes and dying grass of neighboring homes.
This area is much like many other housing developments throughout the Inland Empire. 60 -70% of the homes in this development are in distress!
With a purchase price of just under $400,000 in 2006….The value has dropped to $95,000.
This family was offered a generous loan modification, they already had a negative amortization loan at 5% but the payments were just too much for them. The lender offered them a 1% negative amortization loan for 10 years. After much thought and consideration they decided to Short Sale the home and are now leasing a home in a great neighborhood for what the payment would have been if they took the 1% loan modification for 10 years.
My passion on this subject comes from my own experience in loosing a home. It’s been over a year now, it was emotionally devastating and I felt like a complete failure having something taken from me that I had worked so hard to keep. I made it through it, and you know what? We are in a much better place financially and emotionally not having the burden of a home that was sinking in value faster than the Titanic!
I check the comps on that house every so often….just to see what’s going on. Wow, we made the right decision for us!
