Foreclosure and Alternatives to Foreclosure - what are the Pitfalls?

Real Estate Agent with Allison James Estates & Homes, Sarasota 941-957-3737

Sarasota, FL  -  Facing foreclosure can be overwhelming and "walking away" from your property may seem like the easy answer, if you are unable to locate a cash buyer to buy your property quickly and at a price you need to sell for.  There are alternatives to foreclosure, however their are also pitfalls to consider as well. 

Bankruptcy Pitfalls -

•  A repayment plan in a bankruptcy may be higher than if a homeowner had eliminated the negative debt through a Short Sale.   Bankruptcy is not always the cheapest way out.

•  With bankruptcy, you are losing the opportunity cost of having good credit up to 7 years.   This may not seem important now, however it may if you need this resource in the future and it's not available to you.

•  Bankruptcy does not always relieve you of future financial liability in the case of a foreclosure.  Often when a property facing foreclosure is worth less than what is owed on it, the trustee will abandon the property, leaving the liability and ongoing expenses back with the homeowner (until the property is foreclosed).  In this case, a homeowner should still consider completing a Short Sale, even after filing bankruptcy.   

Mortgage Modification Pitfalls -

•  It's no secret that most Mortgage Modification Plans fail.  Why?  They don't solve the problem with properties that are worth considerably less than what is owed on them and the homeowner is stuck paying on a home that is not worth the amount owed on the property.  

•  In most cases you have to qualify for a Mortgage Modification and then hope the lender will follow through with cooperating with you, after you have cooperated with them.   In many cases this does not happen, which is another reason many Mortgage Modification plans do not work.

Short Sale Pitfalls -

•  You have to sell your house.   This can be very difficult if you have a strong emotional attachment to your property.    Unfortunately we see homeowners lose their home in the end anyway, because they waited too long to make a different decision.   If you are at risk of losing your home, the sooner you explore your options, the better chance you have to come to a better solution than foreclosure.

•  The process can be long and tedious.  Yes, this is true.  Hiring a qualified Short Sale Real Estate Broker can eliminate much of the aggravation through their experience.  Also reviewing information on the Sarasota Short Sale Blog can help offer some free information.

Foreclosure Pitfalls -

•  Your credit is ruined for up to 7 years, in comparison to potentially 2 years with a Short Sale.

•  You waive your right to potentially avoid receiving a deficiency judgment, compared to potentially having a deficiency judgment waived as a condition of sale in a Short Sale.

•  Foreclosure could also affect your job, future employment and future housing opportunities.

In closing, if you are facing foreclosure, there is no right answer that works for everyone.  Everyone's situation is different and it is important to seek advice from those qualified to give it.  This includes a qualified CPA, attorney and/or a Short Sale Real Estate Broker.



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For more information on Short Sales in Sarasota and Foreclosures in Sarasota, please CONTACT USWe have over 25 years experience in real estate, and have been highly successful in negotiating short sales in Sarasota County & Manatee County, Florida.

Troy Funk, CDPE, SFR
Sarasota Certified Distressed Property Expert
Sarasota Short Sales & Foreclosures Resource
Florida Licensed Real Estate Agent

Allison James Estates & Homes
665 S. Orange Ave. #2
Sarasota, FL 34236
(941) 365-8769

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Susan Goulding
Crown Key Realty, Tracy & Mountain House Real Estate - Tracy, CA
Northern CA - Tracy & Mountain House Real Estate

Great information, well formatted.  It's amazing how much miss information there is out there.

Jan 13, 2011 04:16 PM #1
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