ALTERNATIVES TO FORECLOSURE
Copyright (c) 2009 Deanna & Jim's GOLD Team
Keywords: foreclosure, short sale, deed in lieu, loan mod
(Disclaimer: Author is a licensed real estate agent in Virginia, NOT an attorney, not a tax advisor,
not a credit counselor. You should seek the counsel of those licensed to assist with the
kind of activities you are considering.)
Life delivers challenges. Sometimes we find ourselves financially over-extended.
If you are having difficulty making your mortgage payments here are some choices available.
The choices are listed in order of increasing damage to your credit, hence decreasing
desirability.
YOU STAY IN THE HOUSE
1. Tough It Out
This popular choice is little fun but most practical for many. You increase your household income
if possible (second jobs, another person working, charging rent to your still home
adult child, renting out the room over the garage, etc.) And you make adjustments
elsewhere in your monthly expenses to enable you to keep paying in full on time.
2. Loan Mod
First mortgage holders are obliged to consider all serious requests for loan modification based
on hardship. Recent initiative by the federal government have provided them both incentives and
tools to allow them to change your loan terms in ways that may work out to your advantage.
This choice is NOT available for investment (not owner-occupied) property. Not everyone will
qualify, but it is always better to talk about these possibilities with your lendor before
you stop paying in full.
3. Short Pay
Some think that they can pay part of their mortgage payment, just pay the first, just pay the second,
or maybe skip a payment on the home equity line of credit. Paying less than the
full amount due on any loan secured by your house will head you to foreclosure just
as fast as stopping payment on all of them. And - unless you resolve any partial/incomplete
payment within 30 days of failing to make it you will be headed towards one of the other
alternatives below swiftly.
YOU ARE MOVING
4. RENT IT OUT
Very frequently the market values will result in the rent you earn not covering your mortgage payment.
Owning a cash-eating rental can have tax advantages for some but is not generally
recommended as a good long term proposition. Once a property is leased the only way to get
the tenants out prior to the end of the lease may require foreclosure.
5. PAY TO GO
List the house with a qualified Realtor(r), sell it for market value and bring money to the table if, and as required, to pay off
all loans in full. ((Or you can sell if For Sale By Owner and get less for it!))
Most people who can afford to do this can afford to keep paying their
mortgage. If the shortfall is small this option is not as distasteful.
6. Sell in Short (Short Sale)
In this choice you list your house for sale with a Realtor(R) specializing in short sales,
a buyer makes an offer to purchase, and your agent negotiates with the bank (banks if you have
more than one lienholder) seeking their approval for a sale which yields them
a "short" payoff of the amounts due to them. If successful you get zero and the damage
to your credit is limited to an entry that your loans were paid off for amounts less
than the full balance. This bruises your credit but is much less damaging than a
foreclosure. Lendors often choose to approve such sales because their only alternative
is a time-consuming and costly foreclosure or a deed-in-lieu "friendly foreclosure," both
of which requiring them to take ownership, maintenance and marketing responsibilities.
We are not aware of any lendors who will consider Short Sales where the borrowers sell
For Sale By Owner (without listing their house in the local Multiple Listing Service).
7. Friendly Foreclosure (Deed in Lieu)
In this choice you give the lendor the keys to the house and the deed and they agree to
consider the loan paid. Damage to your credit is more than a Short Sale, less than a foreclosure.
Many lendors would rather just foreclose.
8. Just Walk Away
This results in foreclosure but creates more damage to both the lendor and your credit because
of the time interval between when you leave and when the lendor figures it out. Deed in Lieu
is better for you and for them.
9. Foreclosure
Eventually, whether you stay in the house ignoring the notice, or you have left, you may end up
here. If you stayed the friendly Realtor to whom the bank assigns responsibility for marketing
the house they now own will show up and begin negotiating terms of your moving out. They will
probably offer you some cash in exchange for you moving within 30 days. If you don't cooperate
the sheriff will show up in 45-60 days and assist you in seeing things more clearly.
FILING BANKRUPTCY
If you face financial challenges beyond making your mortgage payments you may wish to
consider filing bankruptcy. You should consult local bankruptcy attorneys if this is your
situation.
If you file Chapter 7 the Bankruptcy Trustee will almost always require that you allow them to sell your house
forthwith. Consult your bankruptcy attorney.
If you file Chapter 13 you may be allowed to keep your house if you keep making your payments in
full in a timely fashion. Consult your bankruptcy attorney.
HOW WE CAN HELP
Deanna and Jim's GOLD Team is a 3-person, full-time, family team of RE/MAX agents with over 350
residential real estate transactions in the last 8 years. We work with dozens of banks, asset management
companies, and loan servicers to market bank-owner foreclosure property. We handle numbers of short
sales every year. We are pleased to handle normal sales for those who need to move. And
we love to work with buyers of all kinds - ranging from first-time buyers to seasoned investors.
We are led by an associate broker and we have 3 master's degrees. We have extensive formal
training and deep experience in the negotiation and mediation of real estate matters.
And...we'll knock your socks off with responsive personal service.
At Your Service!
At Your Service
Deanna & Jim's GOLD Team
Licensed in Virginia
RE/MAX Olympic Realty
9214 Center St
Manassas, VA 20110
brokerjim@gmail.com 703-969-0410 http://www.1ajent.com
