Archive for March, 2012Posted on: March 30th, 2012 No Comments
Foreclosure used to be the other “F” word. It carried a social and financial stigma that lasted for years. Now, it’s almost as common as getting in a car accident.
A foreclosure happens when a lender takes possession of a property after the owner becomes delinquent for a period of time. In Florida, the delinquency period may only be several months, but the process of actually taking possession can take years. Further, foreclosed (distressed) properties sell at a significant discount compared to non-distressed properties. That’s why most lenders try to avoid foreclosures like the plague. Most foreclosures start when a homeowner hits financial hard times. If it comes down to paying for food or paying the mortgage, people will stop paying their mortgage. Until the housing recession, most owners could sell their homes and at least pay off their mortgage, no matter how much that was, thanks to appreciation. Since property values have dropped, there’s no longer enough equity in most homes for this to happen.
There are alternatives to getting foreclosed on. The most common right now is a short sale, or working with your lender so that they allow you to sell the property for less than what you owe on it. Another option that is starting to become more common is a loan modification. New rules regarding Fannie Mae and Freddie Mac loans allow you, under certain conditions, to refinance your home at current interest rates even if there is no equity in the home.
If you are unable to sell your home short or unable to convince the bank to allow you to do so, foreclosure may be unavoidable. It can be a gut wrenching process, but if you maintain residence in the home and have stopped making payments, you can at least take comforting knowing you’ll get many months of free housing. Before deciding on a course of action, talk with a HUD approved housing counselor or a real estate attorney.Posted on: March 29th, 2012 No Comments
If you bought your home in 2005 or 2006, you’re probably aware of a painful fact: your home is worth less now than it was then. If you also find yourself needing to sell your home, you’re probably wondering how you’ll make up the difference between what you owe on your mortgage and what you’ll ultimately sell your home for. Under the right circumstances, you’ll probably need to consider a short sale.
Prior to our housing recession, short sales were rare. Home values consistently appreciated, so unless your home went into a sinkhole, there were few reasons that you would have to sell it for less than what you bought it for. Times have changed. Now banks are paying homeowners to sell their homes short rather than pay with time and legal fees to foreclose. Almost 34% of all Tallahassee properties listed through the Tallahassee Board of Realtors are presently distressed, meaning that they were or are presently in short sale situations.
Say you bought your home for $100,000 in 2005, but you get it appraised and find it’s now worth $70,000. If you have $30,000 banked you can sell your home and make up the difference to your lender. If you don’t have $30,000, you may be able to negotiate with the lender to sell your home for less than it’s worth. If the lender agrees and you sell your home, one of three things will happen: 1) the bank will forgive the balance of your unpaid mortgage, 2) the bank will hold you potentially accountable in the future for the unpaid balance, or 3) you and the bank will come to terms regarding repayment of the balance.
It’s likely that your credit will be adversely affected by a short sale, which is why you should do a cost-benefit analysis before proceeding. It’s best to consult a HUD approved housing counselor or a real estate attorney prior to doing a short sale.