Distressed Homeowners

Today we are faced with a horrible economy, high unemployment and home values that for many are half of what they were 3 years ago. So if you are a distressed homeowner what are your options? Even if you can get your bank to work with you, LOAN MODIFICATIONS DON'T WORK! Approximately 50% of loan modifications fail with in the first 6 months. So then what's the next step for a distressed homeowner- do a short sale.

Basically a homeowner will list their home at current market value and work with bank to accept an offer. If bank agrees then homeowner is released from the difference of what home sold for compared to what they owed. Short Sales have gotten a bad rap because it can take so long for the bank to agree that by the time the short sale has been approved the buyer may be long gone. It is critical to have a qualified agent represent you and will be diligent in the negotiations with the bank. The current trend is that banks are working more with short sales rather than foreclosing and they are starting to move a lot quicker. Once a short sale is approved the bank will halt the foreclosure process.

What does this mean to your credit? Your credit will take a hit due to late mortgage payments, but a short sale usually only brings your credit down by 50 points. A foreclosure will bring your credit down on average a minimum of 200 points and up to 400 points- OUCH! Before making any decisions on how to proceed with the sale of your home, always talk to your accountant and a Real Estate Attorney. So is there a light at the end of the tunnel? Absolutely! Although your credit will be damaged, usually with in 2 years you will be able to purchase another home.