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9 Ways to Prevent Foreclosure

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Reinstatement

Bring your loan current.  Contact your lender, let them know you’re going to get caught up, and you’ll be able to remove the Notice of Trustee’s Sale and your home won’t go to auction.  Make sure you and your lender are on the same page, and that you get everything in writing.

Forebearance

Contact your lender and work with them to come to a temporary repayment plan.  Keep in mind that this also needs to be in writing.  Bank collectors are not friendly people and what comes out of their mouths is usually not true.  Forbearance is a temporary solution, and it will ultimately benefit the lender over you, but for now, it may relieve a cash-flow problem.

Refinance

Find a better deal.  The ability to do this hinges on your ability to qualify, and the value of your property.  If you owe more than it’s worth, you won’t be able to refinance without bringing the new loan to value ratio within an acceptable range.  This will mean coming out of pocket to bridge the gap.  Not many people can do this, so it may not be an option for you.

Loan Modification

It’s possible, but not likely.  Over 60% of those who attempt to modify don’t even qualify.  The rest manage to arrange something with the lender, but rest assured, it will be in the banks best interest, not yours.  Loan modification doesn’t usually solve the long term problem.  Prinicpal modification is extremely rare.  Don’t bet on it.

Sell the Property

If your payments are too high, sell the house.  If the home is worth more than you owe, you’re going to solve a huge financial burden in your life and you’ll have some cash left over.  Most people in this situation don’t think to down-size, but if you have equity in your home, and your income is such that you’re headed towards financial difficulty, sell the house.  Downsize and live within your means.

Rent the Property

Renting out your property may be a good option for you, but I would encourage you not to carry unnecessary risk in your life.  Renting out, while you’re renting, is a risky proposition because there are costs associated with being a landlord.  If you’re in foreclosure, you still need to be current with your lender to stop the auction process.

Short Sale

Even if you owe more than the property is worth, you can sell the home.  Most lenders will allow this to avoid the extensive costs of foreclosure.  It’s in their best interest to do so, and if you haven’t caught the tone of this message, I’ve been quite clear about the banks.  They typically only do what’s in their best interest.

Deed in Lieu

This is when you voluntarily hand over the keys to your house, much like when you voluntarily hand over the keys to your car.  The problem with this is that it doesn’t solve the problem.  When you hand it over, the bank, who is not in the real estate business, will have to pay the associated costs of selling the house, and that means that every penny that doesn’t cover your loan is a penny they’ll chase after legally.

Bankruptcy

Stupid.  Bankruptcy is something that you should only consider if you’re forced into it. It will slow the process down, but it will not prevent foreclosure.

Comparing Consequences: Short Sale and Foreclosure

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Challenge:  Buy a primary residence with a loan.

After Forclosure:  Probably not for about 5 to 7 years.
After Short Sale:  More likely 2 years.

Challenge:  Borrow to purchase an investment property.

After Foreclosure:  You’ll be waiting 7 years before you can do this.
After Short Sale:  2 Years and you’re golden.

Challenge:  Borrow money from anyone other than Fannie Mae to purchase a property.

After Foreclosure:  Applications ask if you’ve foreclosed.  By law, you have to disclose.
After Short Sale:  No applications will ask if you have ever sold a house short of what you owe.

Challenge:  Maintain Credit Score

After Foreclosure:  You’ll be affected by 250 to 300 points for roughly 3 years.
After Short Sale:  When you close a short sale, they report the debt as paid for less.  This is not as derogatory as a foreclosure, and may only drop your score by about 50 points for a year to a year and a half.

Speak to a debt expert online to find out which route out of the red is going to be the best one for you to take.

Challenge:  Sparkling clean credit history

After Foreclosure:  This will remain on your credit report for 10 years or more.
After Short Sale:  Not reported.  They do not report “Short Sale” on credit reports.  It will be reported as Paid or Settled.

Challenge:  Get a job in the military or other highly secure position in corporate America.

After Foreclosure:  Not likely.  You blew it dude.  Now you have a history of bailing out.
After Short Sale:  No problem.  Won’t show up on a background check.

Challenge:  Stay employed.

After Foreclosure:  Disclose that you foreclosed on your property and your employer may catch wind of it, which could lead to termination, especially if you’re in a position that is sensitive to the company.
After Short Sale:  Not reported on your credit, so they won’t have a clue.

Challenge:  Get a job.

After Foreclosure:  Employers can check your credit, and challenge your potential employment due to this type of derogatory mark on your history.
After Short Sale:  Not Reported.  You’re hired!

Challenge:  Avoid a deficiency judgment.

After Foreclosure:  If you live in a state that is a non-deficiency state, you may be safe, but if you don’t, you may be on the hook for the difference of what the house brings at auction, and what you originally agreed to pay.
After Short Sale:  No deficiency, depending on the type of loan.  Part of the short sale agreement typically releases you from all liability.

Challenge:  Minimize the amount of the deficiency.

After Foreclosure:  The cost of foreclosure increases the amount you’ll be deficient.  If your home forecloses, you could end up being on the hook for far more than if you sell short.
After Short Sale:  Short sales, unlike bank owned properties, sell closer to market value, thereby minimizing the amount that you would be deficient.

Is it a Virus, Infection, or well what!

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There’s a certain threshold in a given area regarding how much you should upgrade your home and how much it will make a difference in the competition. It would not make sense to put a $5000.00 stove in a $200,000 condomimium, etc. That’s just one example. So, when a prospective tenant or buyer is looking for a place to buy or rent, there’s also a threshold to their perception of value, and when something seems out of place, it won’t matter to them that you have the nicest property in the area, when it comes to considering the rent or price.

Most upgrades will increase the ability to sell or rent your home over the next door neighbors, but it won’t guarantee that you’ll be able to draw a premium based solely on those upgrades, especially if the area in which you’re renting or buying doesn’t warrant such upgrades.

For potential rental properties, if you ever find yourself saying, “I can’t drop the rent that low because my mortgage is more than that,” then it’s time to think about the cost of carrying a vacant property.

Let’s say your mortgage payment is $1500/month and your home can draw $1200/month in rent. That’s a loss of $300.00/month when it’s rented. If it’s not rented, it’s costing you $1500.00/month.  If you rent it for $1200/month for one year, you’ll lose only $3600.00.  Let’s see, $3600 divided by $1500 is 2.4.

You choose.  You can be realistic about your asking price and get the property rented and lose $3600 in 12 months, or you could hope and pray you get someone to rent your house at your inflated price and lose $3600 in 2.4 months.  Hmmm… 12 months versus 2.4 months.

If this is your way of thinking, it’s just not realistic and you may need to be innoculated from the virus, infection, or well whatever it is that’s keeping you from seeing the real market conditions.

Remember, time is money and the entire nation is getting a swift lesson in loss mitigation.  Most of us are in a “collection” mindset.  We want the full payment and we want it now, and we waste all of our time trying to hunt it down.  The best method is to mitigate your loss by getting something going…anything.

The Five Stages of Real Estate Grief

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There are three factors that determine the sale of a home.

  • Location
  • Condition
  • Price

What good news!  Why?  You have nearly complete control over 66% of what sells a home.  Granted, you cannot change the condition of the surrounding properties or the type of construction of your property.  I mean, you could raze your house and rebuild a completely different style home, provided your HOA didn’t prevent it, but then you’d be throwing good money after bad as you created a home that didn’t fit the surroundings.  The condition of the surrounding homes has mostly to do with location anyway, so you really do have control over most of the consumer response to your home.

There are five stages of grief that, if you are not in touch with reality, you will traverse throughout your experience selling a house.  Why is this?  Well, selling a home isn’t like selling off your possessions at a garage sale.  Garage sales are usually designed to eliminate junk.  Your home is a very personal space, and you’ve grown very attached to it, most likely.

My job is to provide you with the right information to help you make an informed decision about how you should price your home, and what you can do to improve its chances of selling.

In todays market, of the determining factors that you can control, price carries the most weight, and many sellers have fallen victim to “rear view mirror” thinking.  Newsflash!  The gig is up.  We have to price our homes in line with what buyers are willing to pay.  Remember that the value of a home is determined upon close of escrow.  Asking more than it will sell for does not declare the new value on the block.  The actual sale price of a neighboring like property combined with an appraisal is what is going to help you price your home properly.

Stage 1: Denial. Nobody is exempt from feeling this if their expectations are out of line.  Not even real estate agents these days are pricing their properties realistically.  If you enter the transaction with a realistic outlook on what your home can actually get in the marketplace, you’ll be able to avoid the denial that accompanies the let down after your property has chased the market.

Stage 2: Anger. Obviously if you’ve felt the loss of thousands of dollars (albeit on paper only, which makes the situation even crazier because you never had the money in the first place) then you’re going to experience all five phases.  To what degree is determined by how quickly you can bounce back from fantasy land.  You will be angry about waiting too long to sell.  You’ll be angry when you realize that your Realtor was right when he/she recommended a much lower price bracket than you insisted upon.  Get over it.  It’s time to sell your home.  Make the adjustments now and minimize your losses (remember, that didn’t even exist in the first place.)  And, if you are actually experiencing more than just losses on paper, that’s all the more reason why you should price your home right, the first time.

Stage 3:  Bargaining. Through your anger you’ll find yourself justifying why things are the way they are.  You’ll begin to think things like, “If only I had.”  “Maybe if we try this we can still salvage our…”  Nope.  You’re where you are now, just get it sold.  Listen to your Realtor.  He or she does this every day and sees people go through this process all the time.  Trust us, we are here to help you move on with your lives.

Stage 4:  Depression. This is where you’ll want to give up.  Perhaps you might even consider taking your home off the market because you’ll find no point in selling.  Most people can’t afford to hold two or more properties.  Lots of people can’t even afford one property these days, especially after getting into the financial trouble that lenders allowed.  You may even want to let your Realtor off the hook and find someone else to sell the home.  Trust the Realtor you have.  If he’s done his homework and is working hard for you, stick with it.  We dread working our tails off to be a victim of the fourth stage of grief, which usually ends in you finding another Realtor who advises you to drop your price only to sell where your first Realtor had already suggested you price your home.

Stage 5:  Acceptance. If you’re a healthy person, you’ll probably make it here quickly.  In fact, if you’re a healthy person, you will probably avoid this entire process of grief through the idea of losing your yet unrealized equity gains in your home.

I can’t stress enough how important it is to price your home to sell.  If you’re serious about selling your house, think about the cost in your lives of the process of selling.  You may own two homes, you may have added utility bills through the process…you name it.  The cost of pricing your home too high can last far longer than it’s worth.  Your time is important.  If you’re not actually serious about selling your house, then you probably shouldn’t list it at all.

Are you happy with your real estate situation?  If not, please give me a call and I’ll help you move from point A to point B in as few steps as possible so you can go about the business of living and enjoying your life.

Market Update as of August 18th

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As of the beginning of the week we had a total of 54,674 homes for sale, including all residential property types. By the end of the day on Sunday, our levels had dropped 1.6% to 53,767. The average asking price at the beginning of the week was $408,161 which increased less than one percent. Average days on market decreased by 5.1%.

1256 properties were sold over the past week which was 18.6% more than was sold the previous week. Word is getting out. It’s time to buy.

For properties that sold last week, the average asking price actually increased 2.83% over the previous from $241,098 to $247,941. The actual average SOLD price of the 1256 properties that sold last week was $237,968, 1.4% less than the previous week at $241,268. Those properties on average were on the market 116 days.

It’s All About Relationships

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My grandmother was born in 1908. This is my father’s mother. She was a musician. She was a songwriter, and she is very beautiful to me.

My grandmother suffers with dementia. She does not know me anymore, nor does she know her two sons, my father, and my uncle. I should rephrase. My grandmother is spared the suffering that life offers because of dementia. She does not remember enough to be upset at any point in time. She always talks about God…that, she does remember.

Her name is Evelyn Griffith. She was married to my grandfather, John Griffith for over 50 years. He died in 1994, the same week that I embarked upon a monumental journey with a multi-media company called Camfel Productions. It was difficult to imagine that I would no longer see him in person. However, one year later to the day that he died, I had a dream while I slept and in that dream I met with him and told him that I love him (certainly not unspoken words while he was alive, I loved him very much, and I said it often.) He said goodbye to me in that dream. It was closure for me whether or not it was supernatural or not.

Evelyn wrote beautiful songs and she was even published. She wrote a song to my grandfather called “Delta Sweetheart of my Dreams.” She also wrote a fight song called “Maroon and White” for a college back east.

Why am I posting this? I hadn’t seen her in over a year. She’s 100 years old, and she doesn’t really remember that I’ve visited, nor does she remember who I am. I have had plenty of time, practically a decade, to deal with these facts, so it’s not as hard as it may sound. Her mental health has deteriorated over the years, but physically and spiritually, she just keeps on truckin. She’s been in full time care for about 8 years now, and last week she was admitted to the hospital with a blood clot in her leg. I visited with my dad and uncle (the three boys as she used to call us) on Saturday after Fuel rehearsal, and I was amazed to see how aged she was. The last photo I have of her was on Christmas day of 2000 and it’s hard to remember exactly what someone looks like when you only see them twice a year, if that.

She will be gone soon. As she lay in her bed, she stared at the wall below the television, seemingly locked in a gaze with something that neither you nor I would be able to see. It was clear that she could see beyond this world. She loves the Lord so much and He has been very merciful to her. Grandad fell asleep and never woke up. Baca Baca will also (that’s what I called her). Watching her eyes focused on the ceiling was comforting as it appeared she was staring straight at God. It will be hard to see her go, and I will grieve deeply.

I will miss her dearly when He takes her home, but I am anxious to see her set free from an expired body and mind.

Grandad was the president of a title company here in Phoenix years ago, and also was the president of Paradise Valley Country Club.  Back in the seventies, they owned a home in Lincoln Hills that overlooks Lincoln road, just to the left of a guard gate.  This is where I spent a great deal of time when mom and dad were off and about.  There are no records that I can find online that have their name on them, and no activity on the property since 2001, but the comparables in the area are in the $1.5 Million mark.

It was built in 1974, and I’d love to find out exactly what they paid for it.  It has been in the possession of the same family since August of 1995.  Perhaps I should write a series of articles about all of the homes that I lived in across the valley.  After all, I have been in the valley my entire life, which began in 1972 and it would make for an interesting study of the value of land and property in Phoenix over 36 years.  I lived in about 18 homes I think.

I digress.  Anyway, these are wonderful memories for me.  Perhaps you also have some memories you’d like to share?  Feel free to comment on this article and tell me about your experience in Phoenix and the relationships that you have had that have been valuable to you.