I am asked a lot of times how to stop foreclosure or even avoid foreclosure. Well the fastest way is to make the mortgage payment. Sometimes it is better for a person to sell a Vero Beach home. From speaking to several people that are in a stage of pre-foreclosure they find themselves without equity and even with negative equity. Other words they owe more than the home is worth.
Now here are some steps to avoid foreclosure. Of course the easiest way is to bring the payments current, but most of the time it is the hardest.
Over the last couple year we have heard terms such as work outs, forbearance, loan modifications, Deed in Lieu and short sales. I am here to give you a brief explanation of each.
A work out plan or forbearance is a repayment plan. Let's make an assumption that you have a home worth $200,000.00 and your Principal interest taxes and insurance payment is $1,550.00 per month. Now let's assume that you are 6 months behind. With late fees and back payments you are $9,500.00. Now with simple math you can take that amount and divide by 12 and you have $791.67. To make that deal happen you would need to make your normal payment of $1,550 plus $791.67 to a total of $2,341.67. That may work for some people but for someone getting back on their feet it may be tough. This is a simple form of a work out or forbearance plan. There are other forms of work out plans within a forbearance plan. There are qualifications that the lender will request for a work out plan such as hard ship has been resolved and maybe a financial contribution to the plan and along with income and debt analysis.
The other term is what is called a Loan Modification. This is where the lender agrees to modify the terms of the loan such as placing the balance on the back of the mortgage and also reducing the interest rate. They may also ask for a financial contribution along with the hardship being resolved. Loan modifications can work out and they can fail. Understand that the lender is going to make the deal what is best for them.
The other term is called Deed in Lieu. This is where the lender agrees to accept the ownership of the property without going through the cost of a foreclosure. There are certain qualifications that the lender and owner must agree. Remember the lender will always do what is best for them. They can agree to take owner ship of the home and may require you to pay the difference after the property is sold. This is called a deficiency. They may also be a tax consequence. We are not giving legal or financial advice so please speak to a competent advisor in each area.
The other term is what is called a short sale. This is where the lender agrees to take less than what is owed against the home as either a release of the mortgage against the property or a satisfied settlement. The key for a short sale is to be prepared. Having the paperwork ready and a plan of action. Working with a real estate agent along with a professional property investor can successfully get a property sold with the least amount of effort.
A short sale will involve paperwork such as two months bank statements, tax returns, pay stubs, financial work sheet a hard ship letter (telling you why you can't make your payments) authorization to release information. The real estate agent and investor can provide you guidance with this information.
Jonathan Rexford is the owner and operator of Jon Buy a Home. They specialize in buying short sale or distressed type properties in Vero Beach and Sebastian, Florida. Jonathan is also a licensed real estate agent with Beneduce Realty.