To Modify or Not to Modify

Real Estate Agent with Re/Max Premier Realty, Inc.

There certainly is a lot of confusion about modifying for the average homeowner to try to navigate through today and it is changing by the minute. We have the acronyms coming out of space at us and we as professionals are trying to keep up with it all.  What's a homeowner to do when the lenders can't even figure it out themselves?

What you might want to consider before you even look at a modification is your own local real estate market, you local economy, and the stability of the neighborhood you live in, in addition to how much you actually owe on your home vs. today's market value. Why are all of these factors so important? Well, a modification might not be the best solution for you at all.

Take a good look at you local real estate market. There are many places on the internet you can check, or you may consult with a local professional I would recommend you get at least two opinions on this from very qualified professionals. Ask them to provide you some documentation about the rate of decline in sales prices in your local market, the increase or decrease in the amount of homes selling. Ask them to provide you with neighborhood specifics in your neighborhood. How many are short sales or foreclosures?How many are normal sales? How long are they taking to sell? This will give you an better idea of the current value.

Then look at the unemloyment rate in your area. Is it declining or increasing? Is it worse or better than your state average? Are there prospects of new employers coming into your area, or expansions with current companies? Check with the Chamber of Commerce, or you Economic Development Council. If the rate of unemployment is rising or higher than the state average, chances are that the recovery in housing prices will take longer in your area.

Why is all this information important to you if you simply want to get your payment reduced on your home? If you get your payment reduced through a loan modification, you are going to be signing some new documents from your lender. You may be giving away some rights under this new agreement that you currently have under your old agreement. Most people just don't read the fine print, because they are so very relieved that they have reduced their payments to an amount they can afford and in signing the modification, the mortgage has been brought back into good standing (with payments and interest tacked on to the end of the loan).

Now you owe more than you did before, and it may take many years before your equity will increase enough for you to sell without applying for a short sale anyway.

For some homowners, the obvious solution is a short sale. It just hard to face the fact that you will have to move and become a renter for a while. It seems like a step in the wrong direction, when in fact it may be the best solution of all, epecially while Uncle Sam is has specail allowances in place for you to do so.

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Comments (3)

Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

Nancy:  This is so true ... some homeowners just won't let go ... they are so focused on keeping their home they cannot see the numbers ... won't see the numbers ... refuse to see the numbers ... and choose to stay in denial.  All we can do is educate and hope homeowners will make informed decisions that will serve them well.

Oct 18, 2009 03:33 AM
Nancy Deichman
Re/Max Premier Realty, Inc. - Ocala, FL

Yes Kathleen, I see it every day here. We need to ask more questions than ever before and consult with sellers in greater detail to show them what the best options really are. Each one has their own unique situation. It can be mind boggling.

Oct 18, 2009 03:44 AM
Nelson Acosta
Ocala, FL

Depends not only the the worth but your given lifestyle, sentiment, attachment, financial status, and how long you are willing to wait/able to wait for the market to adjust so you can at the very least break even.  Each situation is definately unique.

Oct 30, 2009 01:41 AM