Cincinnati Real Estate: Options for Delinquent Homeowners

Today I went to Comey & Shepherd’s quarterly meeting and learned a significant amount about how to assist delinquent homeowners who are behind on their mortgage payments. Since this is such a confusing topic I hope this clarifies the information for you.

There are four options for homeowners who are in this position:

1) Loan Modification- If the homeowner wants to try to keep their home, they can negotiate with the bank to try to come to agreeable terms. This is something that the homeowner can do themselves although there are professionals who will charge you a $1000 to assist with the process.

2) Short Sale- If you have 1 or 2 liens on the property this option can be available to you if your bank is willing to participate. If you have more than 2 liens it can be more difficult or not an option at all. Even if your property sells all deficiencies aren’t always forgiven so be sure to consult a realtor who specializes in short sales, a real estate attorney, and an accountant prior to making the decision to sell your property in a short sale.

3) Deed in Lieu of- Can only be used if there is 1 lien on the property. A hardship must exist, and the homeowner must provide a letter explaining the circumstances of the conditions of the hardship for bank review. Usually this option is exercised once a short sale has failed to unload the property. Essentially what happens is the homeowner signs the deed back to the bank, gives back the keys, and moves out of the property. Federal law does not allow the banks to come after the homeowner for deficiencies.

4) Sheriff’s sale- This is a last resort. Allowing your property to be foreclosed and be auctioned off on the courthouse steps can severely damage your credit and ability to obtain a Fannie or Freddie backed loan for a minimum of 7 years.

For more information on this topic please email me or call me and I can refer you to my colleagues who specialize in this area of Cincinnati real estate.