Homeowner Options
I hear it all the time.I’m not late on my payments and I can afford to continue to make the payments but should I?Is the market turning around?Even if I get a loan modification the amount I owe on my home is still substantially more than it is worth.And I will most likely need or want to move before the home is paid off.What should I do?
There are many options when it comes to this situation but which one is right for you?
One of the first things to ask yourself is if your property fits under the Arizona state deficiency statutes.Is it on 2.5 acres or less and is it a completed single family dwelling that is occupied (at least occasionally)?Most people answer “yes” to this.
Now, because in Arizona lenders foreclose on properties via a trustees sale (non-judicial foreclosure), the lender waives the right to pursue any deficiency against the borrower regardless of whether the loan is purchase money or was refinanced.So the borrower is protected financially from a deficiency however the buyer’s credit will be affected and their ability to purchase another home in the next 5-7 years will be questionable.
Another option is for the seller to short sale the property.This would require the lender to agree to release the borrower from any financial liability.Lenders are starting to realize that allowing a borrower to short sale actually saves them money in the long run and is usually in their best interest.In addition, a borrower who has had a short sale can usually buy a home sooner (2-3 years) and their credit doesn’t get hit with as negative of an impact as a foreclosure.This creates a win-win situation where the lender nets more on the sale of the property and the seller has less of a negative credit impact.
The bottom line is that it is important to consider all the options and repercussions of any decision in this market with regard to your home and I highly recommend you review your options with a team of professionals – a tax accountant, attorney and Realtor.
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