We talk to many homeowners who are faced with losing their homes. Based on these discussions we have seen some patterns develop. Something has happened in their life to cause this situation and they are overwhelmed with the thoughts of losing their home and ways to try to avoid that from happening. Unfortunately, many of those potential options to save their home are in vain because modifications are rarely approved and the other options are often very expensive and only postpone the inevitable…the loss of their home. Homeowners go through various life changing cycles during this time of Distress
. They hold out Hope
that the lender will do a modification that will solve their problem. Once they are denied a modification after many months of trying, they reach a state of Denial
where they cannot believe this is really happening to them and that there must be a miracle around the corner that will save their home. Unfortunately, by this time the clock has been ticking for a long time towards the lender forcing a foreclosure. Reality
begins to set in that they have no other recourse but to lose their home and move on with their life. Once this has happened, the only remaining option for them is to find the best way to minimize the impact on their life; avoid the foreclosure and its negative impact on their credit rating and find a dignified exit from their home. The best course of action at this point is to do a Short Sale. Many of these homeowners are upside down in their property and a short sale becomes a viable option to achieve the things listed above. We can help these homeowners because many of them are not aware that a short sale can buy them more time in their home while the short sale is processed and the home is sold and it has a lesser impact on their credit scores while giving them time and resources to make a dignified exit from their home. Look around your neighborhood, town, city, market…short sale opportunities abound. Let’s try to help these homeowners. They are good people put into a bad situation. Often they follow a course of action outlined below…a very frustrating process. As agents, you can help them understand how a typical process works and how best to help them.
1. They develop some type of hardship resulting in the inability to pay their home mortgage and they have fallen months behind.
2. They approach mortgage lender to do a loan modification to reduce payment.
a. Lender requests loan to be brought current or will add deficient payments to the backend of the loan.
b. In most cases, they will be turned down for a loan modification. The approval rate for loan modifications is very low. National averages are less than 5% approved.
c. In some cases, if approved the actual monthly loan payment will increase thus not resolving the issue of not being able to make their monthly payments.
d. Often, they will not be given an answer on their mod request until it is too late. Typically the excuse is that the underwriters are still looking, etc. Months can go by and many times they will receive a notice from the mortgage lender during this process that they are moving forward with a foreclosure.
e. They will still be holding on to hope that they will receive a positive confirmation that the mod will be approved, however, most of the time that answer is no. They will be turned down and the clock will be ticking towards foreclosure.
3. Some homeowners will turn to a Foreclosure attorney at this point to see if they can assist in stalling the foreclosure. Often, the attorney can assist in stalling the inevitable foreclosure for several months or longer, however, homeowners pay significant monthly fees for such service. But remember, they are only stalling the foreclosure….the home will eventually have to be foreclosed.
4. The reality “shocker” is that they will lose their home and there is nothing they can do about it now. The period of “denial” is over…they have to make some decisions quickly.
5. Avoiding a foreclosure is still in their best interest because it is better on their credit rating since it would remain on their records for approximately 10 years in the event of foreclosure.
6. If they have equity in their home which most homeowners do not have, they should try to sell it fast, but many homeowners throughout the country do not have equity in their home anymore and it is upside down…they owe more than what they can sell it for!
7. At this point, a viable alternative to foreclosure for homeowners in this situation is to do a short sale on the property. Find a company that can help them do the short sale process by providing all the documentation required by the lender(s), negotiate a price with the lender that will allow the home to be sold, find a realtor that will be aggressive in selling the property, and buy them a few months to stay in the property until it is sold. It is not the result they wanted which was to stay in their home, however, it gives them a dignified exit from their home, has a minimal impact on their credit rating and in some cases provides them money at closing to make the move. They can move on with their life…and within a couple of years they will be able to buy a new home, if desired. If they are in this situation, they need to move quickly now to avoid the foreclosure and get on with their life! Observation by Tom Ownby - Partner Nationwide Short Sale Solutions