Underwater real estate - We all know someone...a friend, a co-worker, a relative... maybe it's you. Like millions of Floridians, you bought your home during the boom, and mortgaged 80-90% of the purchase price, which at the time seemed reasonable. Then came the crash and your property has lost 40-50 % of its value. Now you have a mortgage that is more than the property is worth, and your monthly carrying costs are draining your savings. You are starting to fall behind on your mortgage and are ducking calls from your lender. If this is you or a friend, here are some suggestions on how to resolve your situation...
First, make the decision to take action to end the pain. If you’re embarrassed it is understandable, butmore than 1 in 3 people are underwater on their mortgage.
Second, to determine your situation, fill out a financial analysis (download at www.rayonrealestate.com)
Third, check out the various Lender and Federal programs that are available for distressed homeowners. Your choices include:
• Loan Modification: This is can be a good option, if you are eligible. Lenders may lower your interest rate and reduce your payments; or reduce the principle amount; and in some cases, possibly forgive accumulated past due payments, interest and penalties.
• Short Sale: Based on your specific situation, your lender would agree to allow the sale of your property for the current market price, based on their appraisal.AShort Sale is generally the least damaging to your credit.
• Deed-in-Lieu (DIL): With a Deed in Lieu of foreclosure, you, the borrower, will convey all interest in your property to the lender to satisfy the loan in return for a waiver of deficiency. Another benefit is that a DIL hurts your credit less than a foreclosure does.
• Foreclosure: Foreclosure is a legal process whereby the mortgage lender or other secured creditor repossesses a property after the owner has failed to comply with the terms of the mortgage. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and can file a claim for a deficiency judgment against the borrower.
Fourth, to fully explore these options you’ll need to work with an experienced Realtor® or real estate attorney.
With all of the Federal and Lender programs available to you there is no reason to passively allow your property to be repossessed. Foreclosure is the worst possible option, and for many, a Short Sale is a good solution, but you need to take action. Remember, there is no free lunch! You can stay in the property, but every month you miss a payment, your deficiency increases; and your credit suffers greatly. Also, by continuing to live in this bad situation, you are preventing yourself from “Resetting your Life”.
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