I’m Underwater on My Home – What Do I Do Now?

Many Daytona Beach Homes owners are underwater on their home, meaning that there home is worth less than they owe. The North County Time in the San Diego area published a good article recently describing your options and the effects of those options.

Your Part of a Big Group

According to the article,

“Nationwide, 32 percent of mortgage holders owe more than their houses are worth, according to estimates from data firm First American CoreLogic. About 14 percent of mortgages are behind on payments, says the Mortgage Bankers Association.”

Basically, that means that close to one in three mortgage holders in the US owe more than their houses are worth. We know that California, Florida, Nevada and Arizona have been the hardest hit because that’s where the speculation was highest before the real estate bubble burst.

Your Choices

You have basically four choices if you are underwater:

1. Hold and wait it out
2. Loan Modification
3. Short Sale
4. Foreclosure

Each of these options has implications on your credit and possible tax consequences. Eric Wolff at the North County Times does a good job describing those consequences. Eric talks about three options. I added the first option of hold and wait it out. That’s what a lot of people are doing. They are living in their homes and waiting.

The loan modification option has the least impact on your credit score and is worth a shot is you have a convincing hardship. If the lender agrees, you’ll get a three month trial to make the new payments. If you do it, you will probably have the option of converting that new payment permanently. If you’ve has any loss of income or other hardships, this may be the best option to hold on to your home.

Short Sales and Foreclosures

Once you decide to stop making payments, you will be considered delinquent and the legal process leading to eventual foreclosure will start. Your credit will be impacted and you will eventually lose you home. Short sale is usually a better option, but be careful of any contract the bank provides. Have a lawyer check it out and make sure you are clear and free from additional payments and tax consequences.

Daytona Beach and Volusia County Homeowners

The Daytona Beach area has been hit very hard. The overwhelming majority of our sales for this year have been short sales and foreclosures. We have handled both sellers and buyers and have masters the process by closing over 22 transactions this year so far, at least as far as it can be mastered. The process is not difficult, but it’s tedious and requires a lot of patience and follow-up. We know how to work with lenders and that’s absolutely critical to short sale success. It’s a little more straight forward with foreclosures, but still requires knowledge of what the banks are looking for in an offer.

Knowledge and experience in dealing with short sales and foreclosures is a required skill for real estate agents in the current market. Make sure your agent has the skill. You can talk to me about selling your home or buying in this market. Give me a call at 386-566-7503. I always return messages.