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Negative Equity Fuels Strategic Defaults

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Real Estate Agent with Remax Excellence - Silver Spring, MD Maryland #318884

Silver Spring, MD homes continue to experience relative stability when compared to the nation.  Only 0.05 percent of Silver Spring homes and Montgomery County homes are in foreclosure, which is below the state average of 0.07 percent and the national average of 0.14 percent.

According to Zillow’s Negative Equity Report, about 15.7 million homeowners nationwide – or 31.4 percent – are underwater.  Of these homeowners, one out of every ten are delinquent on their mortgage, 10 percent of which are 90 days past due.

“While it was disappointing to see negative equity numbers remain so high, it is important to note that negative equity remains only a paper loss for the vast majority of underwater homeowners,” said Zillow Chief Economist Stan Humphries. “As home values slowly increase and these homeowners continue to pay down their principal, they will surface again.”

Unfortunately, some homeowners view negative equity as a reason to justify strategic default.  A strategic default takes place when a homeowner decides to stop paying their mortgage, even though they can afford to continue making payments.  This leads to long-term negative consequences, especially with respect to the borrower’s credit score. 

In a homeowners’ survey, similar to Zillow’s Home Price Expectation survey for June, 59 percent of respondents said they would not strategically default – 37 percent of whom cited moral reasons, while another 35 percent said that it wouldn’t make sense for their situation.

“These survey results suggest that economic and financial considerations are not the dominant drivers of behavior for even deeply underwater borrowers,” said founder of Pulsenomics, Terry Loebs.

For many underwater homeowners, a short sale may be the best option.  Short sales in Montgomery County affect the borrower’s credit to a lesser degree than foreclosure.  Homeowners should take every measure to avoid foreclosure, as the ramifications for this can be long-lasting and devastating.

If you are one of the many trying to prevent foreclosure, know that you do not have to do it alone.  To learn more about foreclosure alternatives, contact Emcee Arah and DeeCee Real Estate online or call 301.452.5252. 

As a real estate professional who has earned the Certified Distressed Property Expert (CDPE) designation, Emcee and his team of professionals have made it their mission to know the best possible options available to distressed homeowners for both their present AND their future…and you can trust that your free consultation will be always be completely confidential. 

 

 

 

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