Short
Sale -vs. – Foreclosure
( What’s
better for you?)
Millions
of Americans
are
facing this question:
"Should
I just let my
home go into Foreclosure, or a Short Sale with the bank?"
What
is the sensible
thing
to do?
My
advice is for you to
remove the emotional aspect of this decision first,
What
to do now can have
repercussions
for many years down the line. Some people are even
talking that 2005 was and will be the highest value in Real Estate in
our
lifetimes?
That’s
not
good if you are
underwater on your mortgage.. .
“Stick
it to the bank!”
Do you really want to do
that?
In
a way, I understand
that
the banks have gone out of their way to dig this hole we are presently
in. .
destroying trillions on equity money that was supposed to pay for your
retirement or your child’s college tuition.
Now.
. you are facing
hard
decisions.
I
know you are not
happy. .
I’m not either.I lost hundreds of thousands of dollars in
equity value on my
own home. . .I will probably never see that again.
I
got caught just like
anyone else. . it was easy and the banks made it easier by putting all
this
money on our laps to buy anything.
Now
it’s too
late. . .
The
question now becomes
what
will have a bigger long term effect on my credit and lifestyle?
As
far as I can see. .
you have these following options
Swallow hard. .it's not going to be easy. . .
.
#1 You may continue
making payments, disregard the value
of your home and do the right thing. . .pay what you said you
will pay. Yes, the banks screwed you by sucking you in a
black hole of negative
amortization, adjustable rates and teaser rates.. .you will more likely
suffer
a negative cash flow for years to come. Remember, the Obama
administration has said.
”In
a healthy economy, real
estate should grow up to 3 to 5% per year”
The
underlying message here is :
“We screwed up
in 2004-2005 and we will not let it happen again!..
if
real estate shoots up to the roof again. . They will simply raise
interest rates
to control it., They’ve learned their lesson”
What about
you. . . have you?
This
solution is very hard to swallow. .in a way you will be stuck
with your property for years to come making the bank very happy . . .
paying
the interest rates by holding an imaginary gun to your head.
.in the form of:
YOUR
CREDIT RATING !
In our
country. .ourr credit reputation is GOLD.
That’s
what our parents taught us.
But there
is a limit to this debilitating belief?
Are you
willing to work for years and pay your hard earned money for an
investment that went BAD? .
.
But
you have decided to do the honorable thing now?
How long
can you afford to go with a negative equity on your home?
A few
years?
Do you?
.
. It’s your call.
Just in
case you have doubts, you may want to explore OPTION #2
#2 You
can negotiate with the lender to modify your
loans, drastically reducing your
payments, so you at least break even. In some cases you may even get
a principal
reduction. At the least, you
will get a fixed rate and your ARM will disappear.
There is really no reason
for you to hire someone to do a Loan Modification for you.
All you have to do
is call your bank and cry HELP!
If you are
sure, you want to keep the property and don’t mind a
negative equity on your
investment for the next few years. . a loan mod is the least
you should do for yourself.
Remember, these loan
modifications are now
government funded. Yes, that is the bail-out money you been hearing
about.
Caveat:
Simple question. .
Are you sure a Loan Mod is the best for
you with no principal reduction?. ..
Remember, there is a loan modification and a loan
MORTIFICATION. .be careful
when you sign and fully understand the consequences.
One
question you may ask yourself. .. . When will I catch up?, (and more
importantly) will the cost of my
mortgage payments ever be recouped?
If you
don’t
have a potential for profit at the end.. then you are not buying a
home, you
are just renting from your banks. .at a higher rental payment may I
add, plus you get to
fix all the problems in the house. .
Broken A/C unit ? don't
call your bank . ..YOU FIX IT YOURSELF!
Not good
position. .when you are underwater. .if you ask me.
let’s try #3
#3 You
simply do a short
sale.
Short Sales have a far less damaging affect on your credit
report. Did you know that because of
the process of a short sale, you may expect your credit score to lose
around 80
to100 points .
What
does that mean?
Essentially you can buy another home in a couple years after
repairing your credit.. .and can go back and purchase
literally
the house next door.
Yes,
next to the home
you sold previously as a short sale.
You
can buy it now at a
MAJOR DISCOUNT
compared to what you paid for your previous home. . .the one next door.
This
will be the
ultimate
slap on the face for your neighbors. .you come back 24 months later to
the same neighborhood
and your mortgage payment is only HALF of what they are paying. .and
they all still
be under water!
But, this is not about your neighbors. . .is about you, your family.
.
A
hidden
benefit to
you as a seller.. .you are not required to pay your mortgage payments
while you are doing a short sale.
You
are doing a short
sale because you have a hardship and
hardships exist when you don’t have money. I can not legally
advice you NOT
TO PAY your
mortgage when doing a short
sale but typically all my clients that we have
helped before. . .they simply couldn’t afford it. A short
sale takes a few months from beginning
to the end. Meanwhile you are living on your property with no mortgage
payments. .
This
is the only way you
will get any money benefit from your home in a short sale.
Yes,
you do not have to
be
behind on your payments to do a short sale but. .
when I approach your bank
and tell them you are in a hardship. ..they will respond: ”
but you are current on your payments”.
. We have thousands of files with people behind on their mortgages.
.you may
have to sit for a while and wait for your
turn.
I’m not advocating for you
to do a short sale just because you are stuck in a mortgage that will
take
years to break even much less see a profit. .
All
I’m saying
the these banks
created a major trap for the public because of their greediness. .and
now, our Government
is giving them billions and billons of dollars to help them correct
their ways and save their butts.
A
short sale is a piece
of the BAIL OUT MONEY for
you !
If
you have a qualified
hardship/.
.a short
sale maybe the best option for you.
Ok,
maybe you decide
that a
short sale is not an option at this time .. .oryou may already
tried doing a
short sale with a inexperienced Realtor or a shark investor attempt and
now your deal OFF.
This
is the next option
if
all fails. .
#4 A
Deed In Lieu Of Foreclosure
Deed
in lieu of foreclosure sounds too legal but could be an important step
for you.
It
simply a negotiated transaction in which the borrower (or a real estate
attorney. . advisable you do this) proposes a settlement to
his or her mortgage
lender that will enable both the borrower and lender to avoid
foreclosure.
However,
your lender may still file a deficiency judgment for
them to
recoup their losses . . . and that is only for the first trust.
The junior line
or second trust is not obligated at any agreement between you and the
first
trust.
This
can
be done efficiently with a good attorney at hand.
My
take is that a deed in lieu of a foreclosure benefits the bank more
than the
home owner.
In
a short sale, you have the HIDDEN benefit of
remaining on your property for a
few months with no mortgage payments saving
you thousands of dollars. . in a
deed in lieu of a foreclosure. . you are getting out next month PAYING
THOUSANDS OF DOLLARS to your
attorney.
In
a short sale, you can get complete removal of a deficiency judgment and
it costs
you nothing to do it.
In
a deed in lie of a foreclosure. .it will cost upfront money for the
attorney and no guarantees.
Do you
want to save money and just do it on your own?
I would be careful what the banks’ attorney
will draw up for you to sign. . .remember, they are looking for the
bank's best interests. . not yours.
In
the
end, you need to make a decision based on your actual needs.
.this is
just a general advice about your options if you are contemplating a
foreclosure.
Which bring us to teh next option . . .
#5 A Foreclosure.
You can
just let the lender foreclose if all the above fails. It
will definitely ruin your credit, you will have a baggage on you to
carry for the next
few years. .no one will give you the best rates for financing and the
worst of
it is :
you will
have a Deficiency Judgment on your head!
Meaning
that the bank has the right to go after you and recover any assets
you may have now or in the future to recoup the money that
they lost selling your
home as a REO property.
That is
not good. . .
Add to
this, the tremendous strain on your marriage and your
health.
You should try to avoid a foreclosure by any means necessary. . . But
just
one thing to make you feel better if you are heading to one.
Our
country will more likely have over 8,000,000 foreclosed homes
before all of this is done. That is 8 million families will be directly
damaged
by a foreclosure.
Taking in consideration that each family has at least 3
people . .
We are talking about 24
million people will be affected!
The
Government and other institutions will have to come to grips
and create new ways to helps these families. .
in other words a foreclosure on your
record today may not be as bad for you in the future.The Government
simply
can not ignore 24 Million people and leave them in the curb.
Of course
a combination of Option #4 does not come hand and hand
with a
BANKRUPTCY
. . . . FORECLOSURE’S UGLY
COUSIN !
The worst
case scenario .. . you may have to declare bankruptcy to
clear the deficiency judgment off your head but then you will end up
with a foreclosure
and a bankruptcy on your record. .
Double whammy
Not good..
.
Please
read below about how we can help you avoid foreclosure at
no charge to you.
No one can
guarantee you success in a short sale ..but at least it will open up
the road to finally get rid of
the tremendous pressure you may find yourself in and face it.
The
Dreaded Disclaimer:
I can not
legally advice you about any of these options in this publication,
I will strongly advice you to seek the professional help from your
accountant
and your attorney. The decisions you make are life changing and should
not be
taken lightly.
The reason
I wrote this is because, I talk to people almost in a daily
basis about their situation. . attorneys, doctors, engineers
even including other
Realtors. .. .and just about every day I see people looking at
their saving disappear while putting themselves in more
harm by borrowing from friends and family . . . .and dig
themselves in another hole.
But
n
ow is your turn. . .
If only
one thing you will take from this. . is that I want
for you to take the emotional aspect of losing your property right now.
Write down the
pros and the cons. . .does it make any sense for you to continue this
way?
From a business perspective. What are your
possible losses and what are the possible benefits?
And now take the
bull by the horns and do something !
This is
not going to get better by simply ignoring it. .
Remember.
. selling your home in a short sale is just that. . .selling
your home . .
and NOT LOSING IT TO A FORECLOSURE!
Wishing
you the best..
Fernando
Herboso
Founder of
Herboso & Associates
People
helping People
“Don’t
pray for a miracle. .expect it!”
~Fernando
Herboso2009
