Despite the healty uptick in home prices, one of out of 4 Home loans are underwater where the home’s value is less than the value of the mortgage! And with unemployment still at record levels, it’s no wonder that some folks are struggling to make their monthly mortgage payments. One of the better alternatives to a Foreclosure could be a Short Sale for your Los Gatos home where the lender(s) agrees to the sale of the property for less money than it’s owed on the property.
One of the benefits of the Short Sale are than the home loan is reported to the credit agencies as “Paid/Satisfied” which minimizes any damage to the owners credit score. In addition, most lenders now offer Relocation Expenses as part of the Short Sale negotiations to motivate the owner to vacate their property where they have stopped making payments. In fact, last week Wells Fargo jumped into the mix with Relocation Incentive for their Wachovia and World Savings Loans that are under water with relocation funds of $10-$15,000!!
In the past we have criticized the banks for their insane moves, but this can NOT be considered one of them since some Los gatos home owners who have been living without making any payment had no reason to move. Now with the threat of looming foreclosure, these incentives are very timely, specially since the tax forgiveness of these relocation funds might not be available in 2014. Another feature of Short Sale is that in most cases there is No Cost to the Seller for the Short Sale and majority of the costs are covered by the lenders.
Foreclosure on the other hand, is a legal process where the lender acquires the title of the property from an owner who has stopped making payments on the loan. But the implication of a Foreclosure are severe drop in the owners credit score and substantial loss in their ability to borrow money in the future. In fact, results of the Foreclosures appear on the owners credits history for up to 7 long years!
There are alternatives to Foreclosures which are Deed in Lieu and Bankruptcy and they will be covered under different blogs.
However, you should contact an experienced Short Sale agent to better understand all your options.