Friday, October 26, 2007
Thinking Outside the Short Sale Box
Dear Sue
I was one of those homebuyers who bought at the peak of the market, June of 2005. I could barely qualify to buy the property. I was lucky to get an introductory interest rate at just 3%. Even at this low rate it takes everything I have to make the payment.
The lender told me that the interest rate would go up in three years. That means that I have until June of 2008 to sell my home. I tried to refinance but my lender said that my house doesn’t appraise for enough to get the loan I need.
I really want to keep my home but selling seems like my only option. I have been interviewing real estate agents hoping to get one that will get me out of this mess. One of them suggested that I stop making payments and let the bank foreclose on me. Another agent suggested that I ask my lender if I can do a short sale.
This is all very confusing to me and I can’t say that I like any of these suggestions because I would really like to protect my credit. Call me old fashioned but I am not comfortable walking away from a commitment.
I am looking for alternatives. Do you have any suggestions?
Trapped Ted
Dear Ted
First of all, you must have all the information before you can make any decisions. Many people in your position feel a great deal of shame and choose to put their head in the sand. These people usually end up in foreclosure and surprised when Uncle Sam sends them a tax bill.
Your search for alternatives is a great way to start taking control of your situation.
Before going the short sale or foreclosure route consult a trusted tax professional. Find out if the loses on a foreclosure or short sale are deductible or taxable. It is important that you understand the tax impact of discharging debt. The IRS currently considers debt relief the same as income.
Since you say that you would like to keep your home I want you to know that in past downturns in the real estate market I have seen homeowners get partners that share in the current debt and future appreciation. They make agreements that when the property is sold in the future they share in the appreciation. These partners can be friends, family members or investors. No matter what your relationship, it is imperative that you have your partnership agreement drawn up by a good real estate attorney.
Renting out a portion of your home is also something to consider. Think about renting out a room or two. Do you have pastures or storage buildings to rent? This extra income can offset your mortgage payment.
Maybe you have other valuable assets that you can sell such as rare stamp or coin collections, antiques, extra vehicles, boats, planes, trains, etc.?
Talk to your parents or grandparents about gifting your inheritance now. Many parents or grandparents would love to see their children enjoy their inheritance while they are still alive. Would they consider a loan against the inheritance?
Contact your lender and ask what they have available as an alternative to foreclosure or short sale. The Federal government as well as the lenders do not want to see people lose their homes. They are creating programs as I write, designed to help people to keep their homes.
I am sure there are number of other alternatives for you. Keep asking your friends, family and other professionals. Get on the Internet and Google for options.
There may be programs in the works that can help if you just do your research and hold on a while longer.
Thinking outside the foreclosure and short sale box is a Matter of Good Home $$s and Sense.
I was one of those homebuyers who bought at the peak of the market, June of 2005. I could barely qualify to buy the property. I was lucky to get an introductory interest rate at just 3%. Even at this low rate it takes everything I have to make the payment.
The lender told me that the interest rate would go up in three years. That means that I have until June of 2008 to sell my home. I tried to refinance but my lender said that my house doesn’t appraise for enough to get the loan I need.
I really want to keep my home but selling seems like my only option. I have been interviewing real estate agents hoping to get one that will get me out of this mess. One of them suggested that I stop making payments and let the bank foreclose on me. Another agent suggested that I ask my lender if I can do a short sale.
This is all very confusing to me and I can’t say that I like any of these suggestions because I would really like to protect my credit. Call me old fashioned but I am not comfortable walking away from a commitment.
I am looking for alternatives. Do you have any suggestions?
Trapped Ted
Dear Ted
First of all, you must have all the information before you can make any decisions. Many people in your position feel a great deal of shame and choose to put their head in the sand. These people usually end up in foreclosure and surprised when Uncle Sam sends them a tax bill.
Your search for alternatives is a great way to start taking control of your situation.
Before going the short sale or foreclosure route consult a trusted tax professional. Find out if the loses on a foreclosure or short sale are deductible or taxable. It is important that you understand the tax impact of discharging debt. The IRS currently considers debt relief the same as income.
Since you say that you would like to keep your home I want you to know that in past downturns in the real estate market I have seen homeowners get partners that share in the current debt and future appreciation. They make agreements that when the property is sold in the future they share in the appreciation. These partners can be friends, family members or investors. No matter what your relationship, it is imperative that you have your partnership agreement drawn up by a good real estate attorney.
Renting out a portion of your home is also something to consider. Think about renting out a room or two. Do you have pastures or storage buildings to rent? This extra income can offset your mortgage payment.
Maybe you have other valuable assets that you can sell such as rare stamp or coin collections, antiques, extra vehicles, boats, planes, trains, etc.?
Talk to your parents or grandparents about gifting your inheritance now. Many parents or grandparents would love to see their children enjoy their inheritance while they are still alive. Would they consider a loan against the inheritance?
Contact your lender and ask what they have available as an alternative to foreclosure or short sale. The Federal government as well as the lenders do not want to see people lose their homes. They are creating programs as I write, designed to help people to keep their homes.
I am sure there are number of other alternatives for you. Keep asking your friends, family and other professionals. Get on the Internet and Google for options.
There may be programs in the works that can help if you just do your research and hold on a while longer.
Thinking outside the foreclosure and short sale box is a Matter of Good Home $$s and Sense.
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