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Four Things You Never Do If you fall behind on your mortgage!

Reblogger
Real Estate Attorney MA 9505496/Broker

Some good points here.  If you are in MA and not in Utah - give me a call instead!

Martin@synergy-metrowest.com  781-694-3513

Original content by Marty and Laurie Gale 5451933-PB00

Four Things You  Never Do  If you fall behind on your mortgage!

DON'T MOVE OUT OF YOUR HOME UNTIL YOU HAVE ALL THE ANSWERS!

Number One

Absolutely Do Not ever deed your property to a third party without absolute confirmation your loan has been paid off.

Note: if you believe this option is best for you, please consult with an attorney – not the buyer’s attorney – before completing the transaction.

If you deed your property to a third party, that party then controls the property. The new owner can rent the property (and keep the rent), attempt to sell the property to make a profit, move into the property or use the property in other ways.

What the new owner might not do is make mortgage payments, and that could become a big problem for you.

Just because you no longer own the property does not mean you are no longer responsible for the mortgage loan obligations. The lender made the loan to you. And until it is paid off you will be primarily responsible for the mortgage obligation.

If you give up control of the property and the new owner does not pay on the loan, the damage to your credit could be catastrophic.

If you are on the title and not on the loan DO NOT LET THE LENDER ADD YOU TO THE LOAN.

Number Two

Do Not sell your home at a huge discount with out a good reason.

Unless the actual foreclosure sale is less than 30 days away, you have time to explore options. Take a day or two and make a few phone calls. As a general rule, if someone is pushing you hard to get you to sell your property to them, it’s probably because the deal they are proposing is very favorable – to them.  We can slow down the foreclosure process by listing your home for sale on the MLS and stall it when we submit and offer while all this time you are living in your home giving you time to save for the new home rental.  CALL ME. 801-205-3500 If your in Utah.

If you have equity in your home, it belongs to you. Let’s see if we can get it to you.

Number Three

Never ever authorize a prospective buyer to deal directly with your lender. NEVER NEVER !

The buyer has one goal and one goal only, and that is to negotiate a low, probably very low, price with your lender. The buyer will ask your lender to accept a discounted payoff.

The negotiations could go on over an extended period of time, and if the transaction does not work out the buyer may elect not to buy your property. It could leave you with very little time to resolve the situation and avoid foreclosure. Further, you have no control over the information that goes to your lender or the accuracy thereof. It is entirely possible that the buyer could handle the negotiation and presentation of information in a way that makes it very difficult for you to resolve your loan situation later.

If you are going to do a Short Sale get representation from a real professional. It costs you nothing – the lender pays the fees. Someone should be looking out for you.

We can help, and it costs you nothing. We have fought for homeowners like you many times – and won. The lender wins also. They do not want to take your property through foreclosure. That’s why they will negotiate to get the deal done.

Number Four

DOING NOTHING IS A BAD THING!

A surprising number of people just accept what they see as the inevitable, and let the  foreclosure run its course. Don’t let it happen – the damage to your credit will follow you 7 to 10 years and the bank has the right to renew another 7 to 10.   Short Sales really do SAVE CREDIT! SEE REPORT BELOW "How short sale vs foreclosure affects your credit".

Take a little time to explore potential options. You do not want a foreclosure on your credit record. It will hamper your ability to get a consumer loan or a car loan for many years, and it will be very difficult to get another mortgage for a very long time.

 

The Impact of Short Sales / Foreclosures on Credit Reports

Sellers may wonder whether a letting a property go into foreclosure would be easier and smarter than going through a short sale. With a foreclosure, and depending on state laws regarding foreclosure, a seller could stay in the property, essentially rent free, for four months to a year before being forced to evacuate. But that fact alone does not mean a foreclosure is better.

Whereas a short sale involves offering the home for sale, generally listed through MLS. Potential home buyers will make appointments to view the home, some will make lowball offers, agents might hold open houses and, in general, a seller's life will be disrupted, all in the hopes that a buyer will buy the home.

Basics of a Short Sale

Short sales happen when a lender agrees to accept less than the amount owed against the home because there is not enough equity to sell and pay all costs of sale.

How is the Seller's Credit Affected?

• Foreclosure or Deed-in-Lieu of Foreclosure Both of these solutions affect credit the same. Sellers will take a hit of 250 to 280 points. This means if a seller's FICO score before foreclosure was 680, it could dip as low as 400. • Short Sale The affect of a short sale on a seller's credit report is much less damaging. The ding on credit will show up as a pre-foreclosure in redemption status, Steep says, which will result in a loss of 80 to 100 points. This means a short sale with a previous FICO of 680 will see it fall to 580 to 600.

Waiting Period Before Buying Another Home

• Foreclosure or Deed-in-Lieu of Foreclosure. A seller who wants to buy another home after foreclosure will end up waiting about 36 months before a lender will offer any kind of interest rate that makes sense.

• Short Sale The good news for short sale sellers is the wait is much shorter before buying another home. A buyer usuallycan buy again in about 18 months to 24 months.

 

Short Sale / Foreclosure Deficiency Judgments

The bad news is a seller could be subject to a deficiency judgment for the difference between the loan amount and the amount paid. In California, purchase money loans are not subject to deficiency judgments; however, hard money loans, equity loans and refinances are. Other states have laws regarding personal guarantees, which could also result in a deficiency judgment if the home owner is personally liable for loan repayment.

The lender has sole discretion whether to pursue a deficiency judgment in those instances when the judgment is permitted. To determine whether a pending foreclosure or short sale is subject to a deficiency judgment, talk to a real estate lawyer.

If you're a seller trying to decide whether to let a home go through foreclosure versus attempting a short sale, salvaging your credit is the main advantage to doing a short sale. But seek legal and tax advice before making that decision.

 

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Comments (1)

Marty and Laurie Gale
Utah Realty - South Jordan, UT
Utah Realty | 801-205-3500 | UtahRealtyPlace.com

Thanks for the Re-Blog! I think every one should know about this. 

Aug 20, 2010 08:05 AM