Foreclosure, Short Sale or Loan Modification?

Real Estate Agent with Sandbars to Sunset Team at Future Home Realty FL Lic# BK3419398

Vanilla, chocolate or strawberry?

  Some things in life are real simple, you pick the flavor you like and off you go;  it is better to think about ‘good, better or best', all at a cost to you; not so with real estate and the condition that the real estate market is in, at least in Contra Costa County in California.

  For many years, home buyers have been enjoying a boom of appreciation in home values and, everyone knew that at some point, it was going to stop, it's just that no one would know when it was going to happen.  You know which word I haven't heard lately? And I'm glad, it's the word ‘bubble', did it burst? Did anyone hear a boom somewhere? How did it happen? What created the bubble?  Too many questions, let's get to the point.

  The majority of the problem was created by ‘toxic financing', which abruptly stopped during the spring of 2007, as reported by Ramsey Su of the Wall Street Journal on his article aptly named ‘Why Be a Nation of Mortgage Slaves?' on Saturday, December 31st, 2009.  no more 100% financing, no more negative amortization option ARMs, no more piggyback seconds and no more NINJA (no income, no job, no assets) loans.  These products all worked great as long as the market was going up, up and away...

  Foreclosures and short sales now dominate sales.  Home prices now are realistic, sales volume is up.  F&SS will drive the market for a while, until all the bad loans get rebuilt; home owners who did not have this kind of loan will suffer until most, if not all of these loans get eliminated.  This will take a while, because, household balance sheets have been destroyed by taking on too much debt via the purchase power of inflated assets.

  Walking away from a mortgage via a foreclosure or short sale immediately repair the balance sheet.  Credit may be damaged, but homeowners can rebuild it.  The securitization model has proven to be flawed.

  ‘Households that have been foreclosed upon today are the buyers of tomorrow, when given a chance to recover'; Mr. Su also says that ‘Finally, loan modification is not only ineffective, it is evil.  Coercing borrowers to continue paying a mortgage on a home that is hopelessly overvalued and not informing them of alternatives is predatory lending'.

  I know individuals who are in the business (Real Estate) always looking for a quick way to make a buck (actually, lots of them), they are always the first ones to find a great new scheme to make money; guess what they are all doing now: you got it, Loan Modifications.  Not everyone is a bad seed, but I have yet to see someone who has had their loan modified and is happy about it;

  Lastly, since loan modifications are not in the best interest of the home owner, the only two alternatives are the Short Sale and the Foreclosure and the Short Sale, while being harder to execute is the best solution for the lenders, who, in my experience, are beginning to show much more flexibility, as evidenced by my last Short Sale transactions. 

 Here in this area, specifically in Concord, California,  every single one of my clients has been approached about a Loan Modification, they are promised nothing more than the effort that it takes to make a few phone calls, all of them with attorneys involved and of course, there is a retainer's fee up front.  With some of them, the marketing approach has been to place a notice on the door in an envelope that looks like an official County filing letter, with a file number and all, then it says to call the convenient 800 number provided to prevent it from going further, well, you know the rest.

  Let's get these people in the right track with the proper advice and help they need.

Rafael Quintero

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