I have been working with many sellers who owe more than their house is worth.  I want to clear up a couple things, the market is what it is.

1.  What your neighbor sold his house for 2 years ago has no influence on what your house is worth now.

2.  What you paid for your house 2 years ago has no influence on what your house is worth now.

3.  The improvements you did to your house in the last couple years make it more appealing right now, but not worth more than your neighbors.

    Now that everyone is upset.  Let’s get down to the nitty gritty.  If you have to sell your home you can.

1.  Conventional sale, you market the house at fair market value, hopefully cheaper than others in your neighborhood so you have the most value for the buck.  At closing you have enough equity to pay your closing cost, Realtor Fees, and in this market most likely the closing cost of the buyers. 

     You walk away with less than you would have a couple years ago but when you go to buy your next house you score!!!!  You pay much less than you would have ever expected to pay for the house you’re buying and the sellers are most likely going to pay your closing cost.  Now the best part, you probably had an interest rate that was substantially higher than the new rate you’re going to get on your discounted home!

2.  Bringing money to the table, you market the house at fair market value, hopefully cheaper than others in your neighborhood so you have the most value for the buck.  You were smart and saved for a rainy day, well it’s here and in order to walk away you have to bring money to the table to pay the difference between what you owe and what’s required to close the deal.

     This hurts but you will still be fine, your savings is down some and you didn't make any money off your house.  The next will be discounted, you won't have to pay closing cost, and your interest rate will be lower than before.

3.  Short Sale, this is not the worst case but pretty painful.  You’re upside down in your house, like being upside down in a car except you can't trade it in and roll the negative equity into your new loan.

      In this scenario you will not be receiving any money back at closing and you don't have any money in the bank to make up the difference.  There are other factors like your ability to maintain the property, I.E. job loss, military transfer, divorce, reduction in pay, and many others.  This will have a negative effect on your credit as you will most likely become 30-60-90 late possibly more.

      The key here is to start negotiating with the bank as soon as possible in order to avoid foreclosure.  The bank doesn't want your house and you don't want a foreclosure on your credit.  This is a long process but I have been working with people and we are ironing it out, keeping it simple and methodical.  The process works but you have to work with us.

      There is a good side to this, you won't need to file for bankruptcy, and you won't have a foreclosure on your record and in about a year if you keep your credit clean you should be able to buy again at the same good rates as everyone else.

4.  You let your home go into foreclosure.  This is the worst, it is much worse than a bankruptcy and you shouldn't expect to be able to buy a home for at least 7-10 years again.  This should be avoided period

      There are other ways to save your credit, you can file for bankruptcy and depending on your financial situation at the time you could include your property in the bankruptcy and it will be discharged.  This will keep you from getting a foreclosure on your record but you will still lose your home.  There is a lot of talk about programs that will keep you from losing your property but in most cases you will need to have good credit, have the ability to make the payments, and be financially sound.

    No matter where you are if you have any questions please call anytime.

Brady Howard