Although South Florida continues to see increasing sales figures in residential real estate month after month, there are two aspects of this phenomenon that are striking. The first is that more than 80% of the sales we see are in ranges of $350,000 and under. The second, is that well over 50% of those lower priced homes are in short sale or foreclosure, with short sales predominating.
While there have been increases in traditional sales, and an occasional higher priced home manages to sneak into the sales figures, the National Association of Realtors says that foreclosures, short sales, and REOs are the real strength in today’s real estate market.
That simply means short sales are much more common in today’s real estate market than are conventional sales. However, if you are a homeowner who is currently facing foreclosure, and you’re pondering a short sale as a way to avoid it, consider that there are at least 8 other ways to avoid foreclosure in today’s market. You and your attorney and / or your financial advisor should decide what works best for you.
Without overloading you with details, I’ll list the alternatives for you. One large caveat: in today’s tight mortgage climate, none of the lending alternatives mentioned below is a simple process.
REINSTATEMENT: If you were behind in payments, but your financial circumstances have improved enough to allow you to resume payments, call your bank. Find out what you owe, pay off your arrears. At that point, you are considered current once again.
FORBEARANCE: This is a temporary repayment plan set up between you and your bank. It allows you to repay missed payments and legal fees, and is usually set up on a short term basis. Or, it is placed at the very end of the loan. Ask your bank for details.
REFINANCE: This usually involves a new loan with reduced payments. If your credit is still intact and you have enough equity, this may be possible. However, this could increase your payments.
LOAN MODIFICATION: This involves lots of paperwork, and you will have to reveal every aspect of your income and expenses, but it may be worth the effort. Find out if your bank is willing to work with you and if you qualify, based on their requirements. If the bank approves our application, it may consider reducing the interest rate in order to lower your mortgage payments.
SELL THE PROPERTY: This decision is based on the equity you have in the property. If you know you’ll have to take a loss, decide whether you can afford to bring some money to the closing table in order to sell the house.
RENT YOUR PROPERTY: This is just what it sounds like. If you can rent your property for enough money each month to make your mortgage payments, or to come close, consider this alternative.
BANKRUPTCY: This is the B-word that everyone wants to avoid. Unfortunately, even if you declare bankruptcy, it may be only a temporary relief. Eventually, if you can’t make the payments, the bank will foreclose. Most people want to avoid this step because it typically results in a 10 year hit on your credit rating.
DEED IN LIEU of FORECLOSURE: This is the one you’re heard about where you put the keys in an envelope, mail them back to the bank, and say goodbye. While this saves the banks time and money on a foreclosure process, you will lose any equity you had in the house. If this works, it usually results in a minimum two year hit on your credit. Before you bring the house keys to the post office, talk to your bank and to your attorney.
SHORT SALE: By now, everybody has heard this term. A short sale comes about when you want sell your home for less then you owe on the mortgage and your bank is willing to go along with the idea. Short sales have become very common and many people actually brag about selling their homes this way. Short sales are no longer considered a stigma in polite society. While a short sale will impact your credit rating, its effects are usually much shorter term than those of a foreclosure. However, be aware that your bank may still ask you to pay the difference between the sale and what you owe.
IMPORTANT: Discuss short sales, and any of the other foreclosure alternatives listed above, with your bank, your lawyer, and / or your financial advisor.
Written by Marc Jablon, Realty Associates
marcjablon@yahoo.com / 561 / 213 – 6139
www.marcjablonhomes.com/
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