Preventing Foreclosure: Why Selling Your Home May Be Your Best Option
Industry experts pinpoint the start of the home foreclosure crisis to the fall of December 2007. Now we’re two and a half years into it, and it still rages on. However, many homeowners who want to prevent foreclosure are like a deer caught in headlights – they’re perpetually frozen; not taking any action. And, this is about the worst thing that can happen.
Today we’re going to discuss why selling your home may be your best option. While it may be your least favorite option to prevent foreclosure, it could be the only thing to get you out of the financial mess you’re in and allow you to start anew.
Preventing Foreclosure by Selling: How Much Can You Sell For
Many homeowners are underwater in their homes nowadays. What does this mean?
What does “Being Underwater” Mean When it Comes to Home Foreclosure?
Being underwater means a homeowner owes more on their mortgage than their home is worth on the open market. To use a very simple example, if you owe $100,000 on your home, but it is appraised at $75,000, then you are “underwater” by $25,000.
If You’re Underwater, You’re Not Alone: Almost 25% of U.S. Homeowners Are
If this describes you and you’re trying to prevent foreclosure, you’re not alone. A November 24, 2009 article in the Wall Street Journal said that approximately one quarter of U.S. homeowners are underwater. The article, One in Four Borrowers Is Underwater, states:
The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery. . . . Nearly 10.7 million households had negative equity in their homes in the third quarter [2009], . . . Home prices have fallen so far that 5.3 million U.S. households are tied to mortgages that are at least 20% higher than their home’s value . . .
To Prevent Foreclosure, Find Out What Your Home Is Worth
If you’re not sure if you’re underwater, one of the best ways to find out is to have an appraisal done. This will cost a few hundred dollars ($250-$500). You may be not be as bad off as you think. If you are underwater, one option to consider is a short sale to prevent foreclosure.
What Is a Short Sale and How It Can Help You Prevent Foreclosure
A short sale is when the lender (mortgage holder) agrees to accept a lower amount than what is owed on the home loan. Many lenders are agreeable to this option these days because they know the state of the market. They’d rather this than have you walk away from your mortgage altogether (voluntary foreclosure).
Be aware that each lender’s short sale process is different and if you do decide to go this route that you do a short sale with “no recourse.” This simply means that the lender agrees not to come after you for any outstanding balance on the loan. Learn more about short sales and the consequences of doing one to help you avoid foreclosure.
Just know that the the main benefit of doing a short sale is that you do prevent foreclosure, and get to get on with your life.
Preventing Foreclosure: Why Selling May Be Your Best Option Even If You Have Equity
Let’s say you’re one of the homeowners these days who’s lucky enough to have equity in their home. Selling may still be the best option to prevent foreclosure. Here’s why.
If you’ve lost a job, run out of savings and are falling more and more behind, then selling might be a way out. The reason is, it’s taking many job hunters longer to find jobs. And, the older you are the worse it gets.
According to Orlando Huaman, a job counselor:
The job hunt typically lasts from 8 to 23 weeks, depending on where you are and the economy, and how high you are aiming. Don’t count on the “8 weeks”, but mentally prepared for the 23.
That’s almost six months, and some experts say it can be even longer than that, which is why financial experts like Suze Orman say you should have at least 8 months of expenses saved in your emergency fund.
If you’re a senior citizen, things are much more dire. According to The New York Times article, 65 and Up and Looking for Work:
. . . unemployed older workers stay out of work longer — 36.5 weeks on average, 40 percent longer than for the unemployed in general.
Unless you have significant savings and/or other monies you can tap, the quicker you decide to sell, the easier you can rebound if you’re trying to prevent foreclosure. Why?
Because you can not only prevent foreclosure, but also get some extra cash to pay off outstanding debt, handle moving expenses, establish an emergency fund to tide you over until you land that next job, etc. If you do this early enough you may even be able to preserve your credit, which means you can buy another more affordable home . . . if not now, then soon after you get back on your feet financially.
The point is, you can prevent foreclosure. But you have to assess your situation early; accept the cold, hard realities of it, and then make the tough decisions. The sooner you do, the sooner you can put it behind you and get on with the next phase of your life.
Get info on 32 ways to stop foreclosure: Discover what banks won’t tell you & investors don’t want you to know.
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Copyright © 2010 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author