One of the most difficult conversations I have with potential clients is where I discuss what the current market value is of their homes. Most homeowners have attached feelings of pride and sentiment into their homes, especially if they had worked hard to maintain and improve the property.
In our area( Northern Virginia) property values have dropped around 35% since 2005 and we have not hit the bottom yet. I know many other local markets are very similar, and other REALTORS have been saddled with the responsibility of helping many homeowners have a harsh reality check. The equity that homeowners were counting on to shore up their financial future has evaporated. Will it return? Yes, with time I think that things will even out, but for homeowners that are now $70,000.00+ upside down on their homes, the recovery may not happen before they need to move.
Many homeowners are unaware that they can sell and avoid foreclosure through a Short Sale. A Short Sale works similarly to a regular real estate transaction, but the realtor negotiates their commission and the sales price with the lender that holds the homeowners mortgage. Often short sales will take several months to complete, but the outcome can save all involved parties a great deal of stress and money.
Myth #1: A Short Sale will have the same affect on my credit as a foreclosure SO why should I bother? First a Short Sale will always look better to future creditors because it shows your willingness to cooperate and that you just did not abandon the property. Different mortgage companies are reporting short sales differently on credit reports, points may drop anywhere from 0-200, it may look like a credit charge off, and short sales typically only stay on a credit report 4-6 years as opposed to the 7-10 a foreclosure remains on your credit.
Myth#2: I need to hire an attorney to perform a short sale and I cannot afford it! Not necessarily! An experienced REALTOR who is familiar with negotiating short sales will be able to complete the task AND negotiate their commission. Of course REALTORS always recommend legal and tax advisers, but you should not have to pay anyone for a Short Sale.
Myth#3: My home needs to many repairs I cannot sell it now! Your home can be marketed to be "SOLD AS IS" meaning you disclose that the home will not have any repairs made and the sales price should reflect that. The only thing that you may still have to pay for on your home is utilities to make sure that no further damage happens to the home while it is vacant. This too can sometimes be helped if the home is secured properly by a professional and utilities can be turned off to save money.
Myth # 4: I have a foreclosure date scheduled its way to too late to try and save my home from foreclosure! Once a date is set the chances of pulling it off the court house steps are less than 5%, but recently we have had success with certain mortgage companies in delaying foreclosures to market homes for sale. An experienced REALTOR will be able to help evaluate your situation and help determine if foreclosure prevention is a possibility.
Sometimes it just does not make good financial sense to modify your loan to keep your home. If you have had a permanent change in income, your home needs numerous repairs, and if you are $70,000.00+ upside down on your mortgage, even a modified mortgage may not help you turn around your finances for the good. If you have to put more money in to an investment, that is already worth less than what you owe on it, you may just be flushing your dollars down the drain. Our economy and our real estate markets have created many financial pitfalls for current homeowners, but you do have options outside of traditional real estate practices. Please visit my website www.equitynegotiations.com for more information on short sales and the options that are available to homeowners who are experiencing financial difficulties.