Know Your Options! I cannot stress this enough. A short sale vs. a foreclosure may be the best solution for you if you owe more on your home than it’s worth. Before you make any decision regarding this process, seek objective help and by all means understand and know what your options are and the consequences of your decision.
What Are Your Options?
- Refinance Your Home
- Bring Cash to Closing to Make Up the Difference
- Offer a Deed in Lieu of Foreclosure
- Go Through the Foreclosure Process
- Walk Out and Do Nothing Hoping for the Best
First things first! Communicate with your lender(s), I guarantee you that the problem will not go away. Call the lender and ask them to help you with a solution. Seek legal advice. Determine the value of your house. Some people don’t really know if their proceeds are going to be too low to pay off the mortgage(s), so find out. Have a licensed real estate agent prepare a market review to discuss values.
- Refinance – may not be an option if you are months behind on your payments. This is where communication comes in. Find out., If you can’t refinance scratch this option off the list.
- Bringing Cash to Closing – may not be an option unless you have plenty of cash. I did a potential short sale for a friend and he decided that it was in his best interest to bring $40,000.00 to the settlement. He may not however be the typical seller.
- Offer the Lender a Deed in Lieu of Foreclosure – may be a good option if the bank will accept it. This is the process of signing a deed over to the bank in exchange for avoiding the foreclosure process entirely. You may be able to negotiate some of the terms. The way the deed is recorded by the bank could have impact on your credit. Seek legal advice on this one.
- Going Through the Foreclosure Process and Walking Out – are similar processes. I guess the difference is, if you walk out, you won’t get mail from the lender. You won’t get the phone calls on your home phone, and you won’t have pre-foreclosure investors knocking on your door trying to make some weird deal. But…the lender can come seek you out for the loss they incur at some point in the future. Waling out doesn’t offer any real closure for you, the seller.
There are limited options when you are in this type of situation and only a few ways to resolve it. You will need to know how the IRS views the loss that is usually forgiven when a short sale is completed. You may have a tax burden in seeking that option.
Find out more before you make a decision…
The Treasury’s newest initiative on avoiding foreclosure.
Don’t pay for help! There are plenty of agencies today that will council you without asking for money. One of those places is HUD.
