So, we have to get rid of it one way or another. The big problem is that the house has dropped in value since we bought it. I think it is worth around $400,000 and we owe about $600,000.
I am curious about what options we have. What do you think we should do? Katie.”
Here was our recommendation. In this case I would recommend you sell the house. Here are three options that you have.
Option #1: Let your lender foreclose on the home. You just stop making the payments and surrender the home to your lender.
Option #2: Rent the property. This is a good way to earn some extra money.
However, if you are upside down, then it is more than likely that the rent will not cover the mortgage. That means someone will have to write a check each month covering the loss.
Option #3: Short Sale the house and get the debt wiped out. A short sale offers the following benefits over a foreclosure.
You are eligible for another loan within 3 years after a short sale and sometimes even sooner than that. However, if your lender forecloses on the home, then current Fannie Mae Guidelines require you to wait 5-7 years before you can buy another home with a Fannie Mae Loan.
Most other banks and lenders have the same or even stricter guidelines. Any future loan application will require you to answer the question, “Have you had a property foreclosed upon or given title or deed in lieu thereof in the last 7 years?”
If your lender forecloses on your home, then an you’ll have to answer “yes” to that question. If you short sell the house, then you can state “No” because you short sold your home.
With a foreclosure your score is typically lowered by 250 to 300 points, or even more. This often stays on your credit score for over 3 years.
If you short sell your home, then only late payments show up on your credit. After a short sale, the mortgage is normally reported as “paid in full, settled.”
This lowers your score as little as 50 points if all other payments are being made. Oftentimes, this is off your credit report in as little as 12 months.
If your lender forecloses on your home, you may end up having to repay them for the money they lost. A foreclosure can take 12-18 months to process.
This dramatically increases the loss and makes any deficiency judgment potentially bigger. Contrast this with a short sale.
Few lenders ask for a promissory note on a short sale. As an example, on one short sale, the bank lost over $120,000. They settled with the seller for $25,000 to be repaid over 15 years with zero interest.
The seller’s monthly payment was only $138,89. You can often even negotiate and have the promissory note waived. Most lenders also have a policy that the upside down debt is erased on a short sale.
It doesn’t happen every time. So check your options before you start the process. Thinking about a short sale?
I can help you short sale your property and get back on your feet. Send me an e-mail at firstname.lastname@example.org. I will contact you for a free consultation.
When we talk, I will explain how the process works in detail and answer any questions you may have. Or, if you prefer, you can call me at (312) 953-6725
Discover how other sellers successfully completed a short sale and request a free consultation by clicking here.
Thinking about a loan modification? Our Chicago loan modification kit has the instructions you will need to get a loan modification approved with your bank. Click here to request a copy.
Thanks for reading this, Phillip Buoscio.
Phillip is a Real Estate Agent at Better Living Realty – Buoscio Brokerage, Inc.. Chicago Short Sales Realtor:
Phone: (312) 953-6725. email@example.com.
Phil Buoscio specializes in loan modifications and short sales in Chicago Illinois. Chicago Loan Modification Help. Chicago Short Sales. Chicago Short Sale Realtor. Chicago IL Short Sales. Chicago Realtor.
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Phillip Buoscio, Better Living Realty – Buoscio Brokerage, Inc., and the Stop Foreclosure Institute are not affiliated in any way, shape, or form with the government. Our services have not been reviewed or endorse by the government or your lender. Most lenders willingly work with agents on short sales. Why?
Because most short sales are beneficial to a lender. If you accept our offer to help you on a short sale, your lender may not agree to a short sale or to modify your loan. We do offer a loan modification kit.
However, the likelihood of negotiating a modification is like everything else in life. It takes work and persistence to convince your lender to modify your loan. No matter what you or we do, your lender may not approve a loan modification.
We do not recommend that you stop paying your mortgage, because this will cause damage to your credit and could cause you to lose your home. Because we know avoiding foreclosure is so important to any homeowner, we recommend that you speak with the appropriate legal or tax advisor before making any decision.
This is not intended as legal, technical, or tax advice. Please speak with a licensed professional before making any decision. Information is deemed reliable but not guaranteed as of the date of writing.
You have the option to reject a short sale or loan modification from your lender if it does not meet your approval. If you decide not to go thru with the short sale, then you do not have to pay us our fee. We normally make a real estate sales commission for helping you on a short sale.
The views expressed here are Phillip’s personal views and do not reflect the views of Better Living Realty – Buoscio Brokerage, Inc..
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