by Dan Krell © 2009
A tale of three Home Owners
The real estate market downturn is becoming reality for many home ow
ners as they realize their home’s value is less than their mortgage balance. Not all home owners, who currently have negative equity, are behind on their mortgages or need to sell at all. If you feel the need to sell or leave your home, weigh all your options by getting all the facts.
Consider these three short sale scenarios from three real home owners; after consulting qualified professionals, including attorneys, Realtors, and housing counselors, they chose and had different outcomes. The fist home owner decided that she needed to relocate to another state. Although she was not late on her mortgage payment, she quickly realized she was in a pickle because she owed more than the amount she could net after a sale. Her Realtor recommended that she consult an attorney to discuss other available options other than a short sale. After her consultation, she decided that the best move was not a short sale but to file a Chapter 7 bankruptcy and get a fresh start in her new home state.
The second home owner was divorcing and (like the first home owner) was unaware that the market had changed such that they were in a negative equity position. After consulting their attorneys, they moved forward to sell their home through a short sale. Since there were two mortgages on the home, both lenders needed to approve the short sale. The first lender agreed to the short sale, however the second lender did not. To make this long story short, this seller filed a Chapter 7 bankruptcy.
The third home owner was also divorcing and was three months behind on his mortgage. To make it easy for himself, he tried to have his lender accept a “deed in lieu of foreclosure” (sometimes called a friendly foreclosure). He consulted his attorney after his lender refused the “deed in lieu,“ and decided to move forward with a short sale. His lender was motivated and the short sale was quick and successful.
Many real estate agents are soliciting home owners to sell their home as a short sale. Unfortunately, not all of these agents are presenting all the facts and alternatives. Some homeowners may find that they may not need to sell at all; among their choices are attempting a mortgage modification or a bankruptcy filing.
Don’t allow a real estate agent push you towards a short sale without considering all of your options; consult an attorney and a housing counselor. Everyone’s needs and situations are different, it is important to consider all aspects and impacts of your decision. Even if you have a security clearance, consult your attorney to understand what and how derogatory credit items may affect your clearance and employment.
Be wary of solicitations to help you in your time of need, including those by “foreclosure consultants.” Foreclosure consultants (which may include real estate agents soliciting you if you are in foreclosure) must follow local and state consumer protection laws. Don’t be fooled by an “expert certification” given to professionals after attending a seminar or online course. If after considering you options, you decide that a short sale is appropriate for your situation – seek a qualified and experienced Realtor.
This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of November 2, 2009. Copyright © 2009 Dan Krell