Don't wait until it is too late. If you are going to miss a payment soon or you are going to have to move out of the area DO NOT WAIT. If you have waited too long DO NOT just give up and leave! Even if you have had your home for sale in the past and thing there is no wait it will sell, don't give up.
This is part 2 of a post on Short Sales. See part one here. This post is excerpts from information that we have on our websites www.BoiseRealtyStore.com and www.BolesBoiseRealEstate.com. It is a combined effort of information written by my Broker, Jon Gosche, my husband, John Boles and myself. If you want more information on shorts sales (both to sell or to purchase) leave a comment below or email or call one of us for more information.
Note: We encourage all people in these situations to contact a CPA and an attorney to discuss their individual situation and liabilities (taxes, credit, bankruptcy and otherwise) and to find out the most current laws that will affect them and their particular scenario.
Try to look at the situation without attaching your emotions. If viewing the situation from a strictly business viewpoint, you can more successfully analyze which option might best suit your needs and desires and move you towards resolving your financial difficulty. One very important thing to remember: Time is of the essence, so sit and take serious thought of your situation and take quick action in order to allow yourself enough time to complete the chosen process.
Here are nine options when facing Foreclosure:
1. Do Nothing – If a homeowner does nothing, they most likely will lose their home at foreclosure auction. Loan applications generally ask if the applicant has ever been foreclosed upon. Credit reports also disclose this damaging information. Not the best option.
2. Payoff/Refinance – Completely paying off the entire loan amount plus any default amount and fees. Usually this is accomplished through a refinance of the debt. New debt is at a normally higher interest rate and there may be a prepayment penalty because of the recent default. With this option, there should be equity in the home.
3. Reinstatement – Paying the entire default amount plus interest, attorney fees, late fees, taxes, missed payments and fees.
4. Loan Modification – Utilizing the existing mortgage company to refinance the debt or extend the terms of the loan. This may allow the homeowner to catch up at a more affordable level. To qualify, you must prove to the lender you have fixed the problem that caused the late payment.
5. Forbearance – Lender may be able to arrange a repayment plan based on the homeowner’s financial situation. The lender may even be able to provide a temporary payment reduction or suspension of payments. Information will be required from the lender to show that you are able to meet the new payment plan requirements.
6. Partial Claim – A loan from the lender for a 2nd loan to include back payments, costs and fees.
7. Deed in Lieu of Foreclosure – Give the property back to the bank instead of the bank foreclosing. Banks generally require the home be well maintained, all mortgage payment and taxes must be current. Most loan applications ask if this has ever happened.
8. Bankruptcy – This option can liquidate debt and/or allow more time. We can refer you to a qualified bankruptcy attorney. However, this may get complicated and sometimes, depending on the situation, may not be an option.
Chapter 7 (Liquidation) To completely settle personal debt.
Chapter 13 (Wage Earner Plan) Payments are made toward a plan to pay off debts in 3-5 years.
Chapter 11 (Business Reorganization) A business debt solution.
9. Sale – If the property has equity (money left over after all loans and monetary encumbrances are paid). The homeowner may sell the home without lender approval through a conventional home sale. In this case, the homeowner will get cash from the sale. On the other hand, a Short Sale, also known as a pre-foreclosure sale, can be negotiated with your lender by your Real Estate Professional if what is owed is MORE than the property’s value.
I realize that I titled this post "Short Sales" and really only talked about short sales in the last sentence of the last option. But, it is important to look at the situation as a whole and all the possibilities there are. In many cases (consult a CPA and an attorney) however, a Short Sale could be the best option. If there is a possibility for the homeowner to catch up and work something out with the bank and keep the home, that may be the best thing. However, sometimes that is just not a possibility because the owner must move or truly doesn't have the means to continue payment, there's no equity, etc. Deed in Lieu of Foreclosures don't happen that often, and if you can avoid Bankruptcy that's great. A Short Sale isn't the best for you, and could affect your credit and ability to purchase another home for a few years, but it also may be the best option for your situation today to get you out of a bad place and allow you to start again.
If you have any more questions or comments feel free to call or email any of us: my broker, Jon Gosche at 870-2115 or gosche@cableone.net, my husband, John Boles at 830-6185 or johnboles@boiserealtystore.com, or myself at 830-6186 or kaseyboles@boiserealtystore.com. And feel free to leave a comment or question in the comments section below.
Kasey Boles
208-830-6186
Jon Gosche Real Estate
www.BolesBoiseRealEstate.com