In talking with our clients one question comes up time and again - "What are our options?" Closely related to this is the natural next question - "So, whats the best option?" In answering these questions it would be nice if I could come back to one surefire, tried and true answer that worked for everyone in every situation. However, life doesn't usually work like that, and this is a pretty big decision for most folks.
In determining what is the best option, the first question that needs to be answered is - what is the desired outcome? If your desired outcome is to move as far as you can from the money-sucking pit of sticks that you are currently living in (or own) then a sale or short sale would make sense. However, if you really want to stay in the house then a loan modification might be the better bet. Of course, a desire for a loan modification hardly means you will actually get a loan modification, but hey, stranger things have happened.
Another thing to consider is how much money you owe on your property versus how much that property is worth. If the loan amount is close to, or even below the value of the house (meaning you have equity in the house) then you are going to have an easier time obtaining a loan modification (usually). the more equity you have in a property the easier the process will be to sell as you have the option of not needing to go through the bank short sale process. Conversely, if you are upside down on your property it becomes more difficult to obtain a loan modification. In this situation, even if you are able to obtain a loan modification, most loan modifications don't address reduction of principal. It becomes difficult for many people to pay on a mortgage for $400,000 when the house next door is selling for $195,000. I'm not saying its right for the owners to walk away in that situation, but for rational people there certainly comes a point where a ding on their credit is worth saving tens or even hundreds of thousands of dollars.
Other issues that should be fleshed out are:
1. Do you need to move?
2. Where are you going to go if you move? If optional, how attractive is that location versus your current location?
3. What are the costs to move?
4. How expensive will it be to rent? Normally, renting will be cheaper than owning (especially if you are selling an upside down house), however, that is not always the case.
5. How much time do you have to make a decision? Is there a scheduled foreclosure date?
All of the issues mentioned above should be considered before committing to a certain course of action. However, in most cases the homeowner is leaning pretty strongly one way or the other. If this applies to you, that is likely because you have already thought about your options and discussed them with friends and family. Many of the points to consider are likely things that you have also considered. The final piece of advice I would give then is just to make sure that you plan out what happens next after the short sale or loan modification. Make sure you've got a plan that makes sense, and that is best for you and your family.
As always, if you would like to discuss your particular situation you can call our office at 480 532-7999 for a free consultation.
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