If you are facing the potential of going into foreclosure or if you are already in the foreclosure process, it is important to understand all of the options available to you. It is tough to make a decision that best suits your needs without being educated about the process and the choices that will affect your future.
Let’s get a couple of the more questionable options out of the way first: deed-in-lieu and loan modifications.
A deed-in-lieu is nothing more than a voluntary foreclosure: it saves the bank time and money,
but your credit still gets hit with the full ramifications of the the foreclosure.
What about loan modifications? The government’s Home Affordable Loan Modification Program (HAMP) promotes loan modifications as being a viable way to deal with the foreclosure crisis. Yet the current rate of success for those loans to go from trial to permanent modification is 4 percent. Using California as an example, roughly 140,000 trial loans have entered into the modification process; however, only 5,600 loans will be modified based on current success (4%). California is on pace to file 475,000 notices of default for 2009. Those being helped are few and far between given the current numbers.
Here are some more likely options: 1) Option one: stay in the house as long as possible, using bankruptcy procedures to stall the courts until the foreclosure auction date. It doesn’t prevent the foreclosure, but it does let you stay put at the lowest cost.
2) List the house for the amount of the debt and hope someone comes along who loves the house so much that they will pay your asking price before the auction date. You can dream all you want, but the odds are that nobody will pay more than the house is worth, and you’ll end up going back to option one.
3) List the house as a short sale, find a buyer, and make the buyer wait out the short sale process in order to buy the house at a discount. Many real estate agents recommend this solution because it sounds like the easiest thing to do while still earning their commission, but it’s a little more complicated than that.
One complication arises when the agent has to convince the buyer to not only sign the purchase agreement, but to wait several months for the bank to give their approval. The typical buyer needs something that is already available.
Another complication comes up when the short sale negotiations get sidelined because the agent and/or the seller aren’t fully educated on managing the process. The lenders are very well-trained in loss mitigation and debt collection, and if you don’t completely understand the short sale process and how to get through it, they’ll take advantage of that in a heartbeat.
I’ll give you an example. Did you know that deficiency judgments and post-sale promissory notes can be avoided in some cases? You can know the basics of how the process is supposed to work, but shouldn’t you learn how to work the process? Wouldn’t that alone be worth it?
4) List the property as a short sale, but with a Real Estate Investor. A real estate investor will be able to identify a buyer from their list of investors; someone who is willing to wait out the short sale process. An investor will also be able to negotiate with the lender so that the end result is the best possible solution for the homeowner. Realtors still receive their commissions.
Obviously the last option is ideal, and creates a win-win situation for everyone . The above are not the only options that are available, but are the most common. As an experienced Real Estate Investment firm that has successfully negotiated short sales for more than 5 years, we have the experience and practical knowledge to increase the likelihood of a successful outcome for you, the homeowner. As an educated and competent investor we also know how to use contracts and the lender’s own paperwork to get the best results for the homeowner in trouble.
If you would like a FREE, No Obligation Consultation of your situation, call us at 910.794.8104 or fill out the form here.
