Just Walk Away??? – Negative Equity Homes
I’m sure by now you are familiar with the terms Foreclosure and Short Sale! Our economy hasn’t provided a lot of options for people caught in a home when you consider the dwindling home values. First American CoreLogic reported that the percentage of homes with negative equity jumped to 23% in the third quarter of 2009. That means one out of every four homes in America owe more on their mortgage than the value of the property. There are a lot more interesting facts located in this Wall Street Journal article, http://embracevision.com/1_in_4_Borrowers_Underwater.
What are your options? I really only see three options to this current problem…
Option #1: Attempt to obtain a Loan Modification.
This is not an easy option because a lot of lender’s won’t approve modifications. Also, depending on the amount of negative equity in the property, principal reduction will be required. Ask yourself, should the bank take a discount on the loan so you can remain in the home? Depending on how well you can explain this to the Lender will most likely determine the outcome of their decision!
Option #2: Work with an Investor or Real Estate Agent to pursue a Short Sale
This option also requires the Lender to accept a discount on the property. However, banks are more likely to accept a short sale when a loan modification won’t work. Also, if the homeowner doesn’t need to stay in their property, it might be more beneficial to them to work with a professional on a short sale. Going through a short sale will help to save complete devastation of the borrower’s credit and can get them started on the right path for their next home in the near future.
Option #3: Just walk away…
This is the easiest option a homeowner can look at up front. However, the outcome of walking away and going into foreclosure can hold a heavy burden. The burden for the homeowner is the demise of their credit and their dismal hopes for owning a home anytime in the near future. The burden for the Lender is the high cost of going through the foreclosure process. The home will be vacant much longer, which means more damage. Also, they will need to hire a professional to market and sell the property. All of this extra cost along with the discount on the property value doesn’t look very appealing to the Lending Institutions.
My opinion, for what it’s worth, do something…do anything…just DON’T walk away!
Thanks for taking the time to check out my article and as always, feel free to email me so we can chat!
Aaron Clendenning
I want to quote your post in my blog. It can?
And you et an account on Twitter?
Sure, go for it…just be sure to link back to my original post!
Thanks,
Aaron Clendenning