Ventura County Distressed homeowners are asking; Is a short sale the only solution for me?
The answer is no. There are a handful of other options available for folks who find themselves facing this decision.
Here are a few of them:
Regular Standard Sale (pay the deficit equity from other source; retirement or savings).
On average, a short sale can impact a person's credit score anywhere from 50 points to 200 points. Also, a short sale will keep any banks from loaning you money for another mortgage for, on average, 2 years.
* Although I have personally helped a short sale seller buy again just 13 months after her home was short sold, and I have seen the like with other specific sellers.
Ultimately, the decrease in credit score depends upon the number of missed mortgage payments, and other non-secured debts with missed payments (credit cards, etc.).
In order to avoid any credit damage at all however, some homeowners choose to sell their home instead - as a traditional, regular sale. They accomplish this by paying the "short" amount from savings or retirement. Although this could translate into thousands out of pocket, some sellers feel it is worth avoiding the credit impact of a short sale.
Loan Modification
This is an alternative to a home sale, all together. It's smart to check into this option with your specific lender (bank). Give their customer service department a call, let them know you would like to find out more about modifying your home loan, reducing principal or restructuring the loan to lower the monthly payment(s). If you are behind in payments already, this late "balance" can be negotiated too, by sometimes adding the missed payments and fees to the rest of the loan balance. Even though this is not the most economical way to borrow money (meaning, you may end up paying more for your home over the life of the loan than originally intended), some homeowners prefer this option because they get to stay in their home.
Rent Out the Home to Cover Monthly Mortgage Payment
Depending upon the specific reason for considering a short sale, some homeowners find it best to keep the home instead, and rent it out to cover the mortgage payment. If the mortgage payment (plus HOA dues, property taxes, etc.) totals a monthly amount close to what it would rent for, then this may be a viable option to consider. This option also allows for some additional time for the homeowner to think things over, watch the real estate market, speak with local realtors, tax advisors, etc.
Deed in Lieu
What this means is, instead of doing a short sale, regular sale, or waiting for the bank to foreclose on the property, the homeowner simply hands over ownership of the property back to the bank voluntarily. This means that the homeowner still must vacate the property, and will have negative credit consequences. However, the benefit of a Deed in Lieu is there will be no showings, no transactional details to coordinate, and less harassment in the form of letters and calls from the lender / bank (who would normally be attempting to collect the past due payments).
Foreclosure
By 2015, most all homeowners are at least, familiar with this term. A foreclosure is the process of losing a property due to borrower non-performance, or missed payments. This is deemed the least favorable of all the options, mainly because the banks view it as a total disregard for the promise to repay the debt, without effort to make good on the original promise. Additionally, a foreclosure costs the bank the most to complete from start to finish.
In terms of credit consequences for the homeowner, this is the least favorable option. Homeowners who find themselves in this position will not be able to obtain mortgage financing again for a minimum of 4 years (with at least 20% down payment), and likely will not find competitive loan interest rates available to them for several more years after foreclosure. The credit score impact of a foreclosure can be anywhere from 150 to 300 points, depending upon the specific situation.
These are a few of the alternate options available to homeowners thinking about doing a short sale.
As an aside, in February 2015, HAFA qualified short sale homeowners now receive $10,000.00 at escrow closing for relocation. Lastly, debt forgiveness is still available to short sale homeowners in 2015.
For more details about distressed homeowner options visit: http://www.makinghomeaffordable.gov/programs/exit-gracefully/Pages/hafa.aspx
For more information about homeowner options in Ventura County please visit: http://www.ShortSaleNews2015.us
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