My Home Is Under Water! What Are My Options?

Today over 25% of the homes in America have loan balances that exceed the home value. If you’re one of them it’s not your fault and you do have choices which are laid out here.

You didn’t create the deepest recession in our lifetime and cause residential real estate values to drop 30%-60% across the country. You bought a home, the American dream. You worked hard to pay the mortgage and maintain the home and woke up one day underwater. And it all seemed to happen so fast.

Millions of good people are walking away from their mortgage and letting the bank foreclose which adds to the millions of bank owned houses and continues to lower values when they are sold off at distressed prices.

This is certainly one of your options but not the only one and may be your least favorite choice. However, until all your choices are on the table it’s hard to decide which is the best one, so here they are.

1. Remain in the Home: Continue paying until the value increases and give you enough equity to sell without being forced to write a big check to pay the difference.

Pros: Your credit will remain intact and as the years go by your debt is decreased.

Cons: Many people simple can’t remain in the home for various reasons and must have another solution. Most sources say it will be at least a decade before the values of 2005 return and maybe much longer.

2. Rent the Home: Some people are becoming forced landlords and this is an option if you’re prepared to deal with a tenant and your payment can be covered with rent.

Pros: Your credit will remain intact.

Cons: You must find and screen a tenant and then deal with tenant issues and repairs.

3. Deed in Lieu: You may ask the bank to take back the house to avoid foreclosure. If they do you cannot be pursued for a deficiency judgment. Make sure you get an attorney involved in this choice and let him/her approach the bank.

Pros: You are relieved of the home and the debt without foreclosure.

Cons: Your credit score will be reduced and many banks will not accept a deed in lieu of foreclosure.

4. Mortgage Modification: Millions of homeowners are approaching the lender and requesting the terms of the loan be altered.You can ask for principal reduction and rate and payment decrease. Get your attorney involved in this process and be sure to request a release of liability in your offer to the bank.

Pros: Your terms would be changed so you could more easily afford the payments and perhaps the lender would agree to a principal reduction so you can sell the home without covering a loss.

Cons: You may not be able to remain in the home even after a modification, the bank may be totally uncooperative and refuse any modification, your credit score will be reduced

5. Short Sale: If you or a Realtor can find a buyer for the home at a reduced price below your loan balance you may petition the bank for a short sale.

Pros: The loan is paid off and the house is sold

Cons: The bank may or may not agree to the discount and it’s a time consuming process for both the agent and you. There must be a cash buyer under contract before most banks will even consider a short sale. If the house is not listed the bank will likely require you to do so before even considering your request. Your credit score will be reduced. The bank has the option of pursuing deficiency.

6. Let the Bank Foreclose: If all else fails this is an option and one many are taking.

Pros: The loan and the home will go away

Cons: Your credit will be lost and the foreclosure will remain for 7 years, the bank may pursue a deficiency, you could suffer a tax burden if your debt is larger than your purchase price of the home.

7. Bankruptcy: This will stop the foreclosure but is not considered your best option if your real estate loan is the biggest reason for filing. One of the options above will relieve you of the home and the debt without the negative consequences of a bankruptcy. This choice should require a careful analysis with a bankruptcy attorney who has your best interest at heart, not his/her fees.

Pros: Your obligation to pay your debts is gone and your buy more time to stay in the home before the bank completes the foreclosure process.

Cons: Bankruptcy remains on your credit for 10 years and is an ugly, unpleasant process. Your credit will be lost.

It’s true all of these choices have consequences and only you and your personal needs can dictate which is the best for you. However…One of the above options will apply to your home whether you make a choice or not…if you don’t choose, the bank will choose for you!


How To Sell Your Real Estate Notes For Top Dollar

People sell real estate notes to raise cash quickly. A real estate note is just the loan document created when you financed the sale of your house or investment property. It could be a mortgage note, or a land-contract or contract-for-sale. The point is that the buyer is making payments to you, and you want to cash in.

You can sell the entire contract, or just a certain number of payments if you want. The buyer of your property will have the same terms and payments. They will just be making those payments to somebody else.

Selling real estate notes can be an intimidating process. You know you won’t get the full face value for your note, but will there be other fees you have to pay too? How do you know if the buyer is reputable? What is a normal discount on a note? Here are some guidelines to follow:

1. No upfront fees. If they ask, go someplace else. You should be able to find many note buyers who will check your buyers credit and give you a quote without charging you.

2. No other fees, with a couple exceptions. The buyer has already figured his expenses before making the offer, so there are only a couple fees you should have to possibly pay. First, you may have to pay for the title policy, if there are problems with the title that prevent purchase. Second, if the property appraises at less than the sales price, you may have to pay for the appraisal. You should only pay exactly what these cost the note buyer though.

3. Be sure that the note buyer gives you a written purchase agreement with the purchase price and contingencies. Ask questions about anything that isn’t clear.

4. The note buyer should check the credit of your property buyer upfront. Unscrupulous buyers can quote one price initially, and then lower it later, using the excuse of the property buyer’s bad credit score. This is called “bait and switch,” and it isn’t ethical.

5. Contact several note buyers for quotes. You’ll need to provide information like the type of property, sale price, payment amounts, current balance, etc. They should respond within a day or two.

6. When you get a quote you like, you’ll have to send copies of the Mortgage or Deed of Trust, the Note, the closing or Settlement Statement, and the Title Policy. If there is no recent appraisal, they will usually arrange for that.

7. Processing time varies, so ask. Usually, once you agree to the offer and send the documents (if done by mail), you can expect to receive a certified check or electronic transfer to your account within two to three weeks.