Foreclosure? There Are Options!

If you or someone you know is facing foreclosure, there are more than a dozen alternatives that may help you stay in your home, avoid foreclosure and/or minimize the negative impact to your credit. 

Regardless of your situation, the number one imperative is to talk to you lender promptly, candidly and often. The last thing they need, especially in today’s climate, is a property that they have to be responsible for.  It costs them money in taxes, maintenance costs, court fees and labor to complete the foreclosure process and manage the property after it is returned to them.  If you talk to them, very often they will work with you to find a solution.

After that there are options:  some of which may help you remain in your home, some that can help you avoid foreclosure and others that help keep your credit as good as possible.  This article is intended to get you started.   I recommend you consult with a tax advisor, bankruptcy attorney, accountant, a HUD approved counseling agency or other certified professional to determine which alternative is best for you!

This brochure is an excellent introduction to your options:  How to Avoid Foreclosures and Keep Your Home 

If you want to stay in your home, a loan modification, a repayment plan, forbearance and/or reinstatement are your best options. “Robbing Peter to pay Paul” is never a good alternative.  Using high interest credit card debt to pay your mortgage only creates a deeper hole to dig out of.  If you know you will be able to repay the debt – because of a new job, a bonus, a tax refund, a gift or some other anticipated event, talk to your lender first.  Most likely they will be willing to work with you and you can avoid the additional interest on a credit card or short term loan.

If you do not want, or can’t stay in your home, the house might pay for itself. By leasing, leasing with option, lease/purchasing or owner financing the home you may generate enough income to offset the mortgage payments and keep you out of foreclosure.  A lease is a standard rental arrangement. (Be sure to check if your neighborhood has restrictions regarding renting property.)  A Lease/Option is an alternative where the tenants have paid you an up-front amount for the right to buy the house at some time in the future.  They are not required to buy it.  A Lease/Purchase is an agreement that they will purchase the home at some point in the future.  Owner financing may seem like a stretch for someone facing foreclosure.  However, if a fair sales price financed with a reasonable down payment and attractive interest rate provides sufficient income to offset your mortgage, this could be a very attractive alternative.  You become the lender – receiving a down payment, transferring ownership of the house and then receiving monthly payments for the life of the mortgage you’ve given your buyers.  Your current mortgage may have stipulations that make owner financing a challenging alternative to implement.  If you have the right type of mortgage(s), a mortgage assumption can be a great alternative.  Essentially you sell the house with the buyer taking over your mortgage. Depending on your equity position in the property and the mortgage rate you have, you might even get cash at the closing.  If you have a high interest rate and owe more than the home is worth, a loan assumption is not likely to work.  An experienced REALTOR^® can help you explore and implement these alternatives.

You can sell. While many people facing foreclosure today owe more than their home is worth, that is not always true.   If you have sufficient equity to pay off the mortgage and the costs of selling the home, selling quickly and paying off the debt will have the least impact on your credit.    If you owe more than the home is worth and still want to sell, you will need to work out a “short sale” with your lender.  It is important to get the banks’ cooperation and ideally you want them to forgive the balance of the mortgage than you cannot pay.  Results has access to a special program to facilitate short sales that is proving very effective.

Signing over the property to the lender, often in exchange for debt forgiveness, typically has less long term impact on your ability to borrow than a foreclosure.  Often referred to as a “Deed in Lieu of Foreclosure”, depending on your situation, the bank may prefer this option to a short sale with debt forgiveness.

One last alternative to stay in your home may be to declare bankruptcy.  You will need to talk to a bankruptcy attorney to determine if this is the best option for you.

If all your options have been exhausted, foreclosure is the last alternative.  And in some very rare situations, the long term (up to 7 year) impact on your credit and ability to borrow may be the option you choose.

All told, that’s a baker’s dozen options.  So start talking to you lender, begin your research and call to discuss your options! 

Go to More Information and Resources for additional assistance.

Don’t contract lightly!

Unfortunately, I am seeing more and more people trying to walk away from their contracts!  I’m seeing sellers who decide not to sell, buyers who don’t want to buy, and both who won’t honor their agreements with their agents.   In particular buyers are breaching their purchase contracts at a much higher rate than previously.

Buyers typically want to get out of a contract to purchase property because:

• They’ve found another property they believe to be a better deal.
• They realize values are declining and come to think that they are paying too much.
• They find out that they aren’t qualified to get a mortgage.
• They just get cold feet.

What buyers don’t understand is that the contract is a legal agreement and there are serious consequences to breaching these contracts.

 As a buyer if you do not complete the purchase when you have entered into a binding contract, all of the following may happen:

1. You immediately lose the earnest money deposit.
2. You become liable for $ commissions owed to the real estate brokers involved. Not just the agent working with you as a buyer but also the sellers’ agent. The brokers may pursue all legal means available to collect these moneys.
3. The seller may pursue all legal means available to enforce the contract.
4. The seller may sue you for compensation for other damages and losses incurred because the sale did not close in a timely manner.
5. If the brokers and/or seller pursue legal action, you will likely also be responsible for all legal fees incurred.

With these consequences, walking away from a contract is not a viable option for most buyers! 

What are the options?  Don’t get into a bad deal in the first place.  Work with an experienced agent who knows the market where you are shopping.  First you must enter into a contract with the broker/agent so that they are legally bound to assist you.  Then, they can help you see all the available properties that meet your criteria; work with you to establish a price and terms that are appropriate to the market; and be sure you have the appropriate safeguards in the contract to protect you from appraisal and mortgage issues. 

Already in a contract and you want out?  Seek legal council.  It’s your only alternative.

Commitment

If you are a buyer in today’s market, you have many choices. It may seem like a good strategy to have many different agents looking for your perfect home. Well, that game plan is probably back-firing.

Without a commitment to a specific agent, the message you are sending is “I don’t value your services and don’t need you.” You’ve given no agent a reason to go above and beyond in searching for your next home. In fact, you’ve sent signals that there is very little reason to make any effort at all. You appear to be a high risk buyer, one who will take advantage of our efforts and disappear into the night; leaving the agent with nothing.

MORE IMPORTANTLY, none of the agents really know you. There is no perfect home. Short conversations alone do not give a REALTOR® sufficient information to narrow down the myriad choices to the ones that best meet your needs. It takes comparing perspectives about on-line listings and visiting several properties together before someone can truly assess the suitability of a house to your needs and desires. You may have gotten an agent to bite and find some homes for you. But, when their first selections get shot down because they don’t truly know you, they most likely will quietly disappear and you’ll start all over again.

Unless you are prepared and equipped to spend a great deal of time and energy doing all of the research and work on your own – or going through the same steps over and over again with different agents, make a commitment to one agent. You’ll find that new home sooner and more easily if you do.

P.S. Don’t pick the first agent you meet! There’s more to come on selecting a Buyers’ Agent…

Adams’ “bright brass”

John Adams is a well-recognized name in Atlanta real estate circles.  His commentary is published every Sunday in the AJC’s home section.  The vast majority of his information and recommendations are timely and on target.    His August 17^th article about pricing a home should be required reading for anyone considering selling a home!

 

However, now and again, there is something that just doesn’t quite ring true.  One piece of advice in John’s July 27th article, “Simple Things… to Make Your House Stand above the Rest”, has been sticking in my crawl:

 

“* Install a bright brass kickplate at the base of your front door, and attach large brass house numbers to the door or entry area. Also, clean & polish door hardware, or replace, if needed.”

 

If you live in Forsyth County, DON’T DO IT!  Bright brass is the most dated metal you can have anywhere in a property you are trying to sell.  In fact, John’s advice to use bright brass address numbers on mailboxes is also not the best course of action for our current market.  Today the best metal to use for any upgrades or replacements in your home is oil-rubbed bronze – or something that has a similar deep brown color.  Acceptable options are metals with flat black and matte silver finishes.

 

Keep checking back for more feedback on John Adams’ articles.  They are usually valuable shining nuggets but in this case don’t take his “bright brass” advice.

About Ramona

When a satisfied client said, “Everybody should use you. You’re great!” I knew I had achieved my mission: “Provide excellent, professional real estate services to each of my clients.” I am committed to surpassing your expectations as I help you with your real estate questions, needs and transactions.

I’ve lived in the Atlanta metropolitan area and watched it grow for more than 17 years. I’m a successful transplant – one who isn’t at all likely to move north again! During my 20 years as an executive and manager with a few very large companies, I relocated to another state five times, including twice to Georgia. And, I’ve moved on my own within the Atlanta area to get a larger house or live in a better area. My personal experience as a client in numerous real estate transactions (new construction and resale) provides me with the ability to empathize with you, and give practical advice. Plus, “Corporate America” gave me training, skills and work habits that have had a tremendously positive influence on my success as a full-time REALTOR®.

I have over 10 years of experience is consultative sales and contract negotiations. My successful style is focused on helping you achieve your goals, while being extremely honest, and negotiating win-win deals for everyone. My number one goal is to have you enthusiastically refer me to your family, friends and neighbors.

I live in Three Chimneys Farm in south Forsyth County with my partner Bruce Johnson. We are both avid golfers and would be happy to share our insights about local courses with you. My passions include cooking, baking and entertaining. If you are looking for a great kitchen that really works for serious chefs, in any price range, I’ll know where it is.

I’m also a “project person”. Usually something for or around the home, I almost always have a project in progress to paint, remodel, redecorate or create something. Need ideas for that new house? I’m an HGTV junkie and can help you envision your ultimate home.

Please don’t hesitate to contact me with your real estate questions and needs.

Ramona Stoner
Relocation Specialist & REALTOR®
Direct/Fax: 678-679-1659
Cell: 404-664-4116
Website: www.RamonasRealty.com