This article was posted on Trulia..many buyers don't understand the purpose of a home inspection and what to ask a seller to repair as a result of one. A home inspection is not just to find out if any repairs are needed but it is a wonderful opportunity to learn about the house and it's systems.
5 Questions to Ask Your Home's Inspector
Most home buyers feel like they are bona fide real estate experts after all the studying up on loans and neighborhoods, online house hunting and open house visiting it takes just to get into contract on a home these days. But for all but the most handy of house hunters, getting into contract and starting the home inspection process only surfaces how little you actually know about the nuts and bolts and brick and mortar of the massive investment you’re about to make: a home!
So, you hire a home inspector, but it seems like they’re speaking an entirely different language - riddled with terms like “serviceable condition” and “conducive to deterioration” - about your dream home! Here are 5 questions you can use to decode your home inspector’s findings into knowledge you can use to make smart decisions as a homebuyer - and homeowner.
1. How bad is it - really? The best home inspectors are pretty even keeled, emotionally speaking. They’re not alarmists that blow little things up into big ones, nor do they try to play down the importance of things. They’re all about the facts. But sometimes, that straightforwardness makes it hard for you, the home’s buyer, to understand what’s a big deal and what isn’t so much - the information you need to know whether to move forward with the deal, whether to renegotiate and what to plan ahead for.
I’ve seen things categorized in home inspection reports under “Health and Safety Hazards” that cost less than $100 to fix, like replacing a faucet that has hot and cold reversed. And I’ve seen one-liners in inspection reports, like “extensive earth-to-wood contact” result, after further inspection, in foundation repair bids pricier than the whole cost of the home!
In many states, home inspectors are not legally able to provide you with a repair bid, but if you attend the inspection and simply ask them whether or not something they say needs fixing is a big deal, nine times out of ten they will verbally give you the information you need to understand the degree to which the issue is a serious problem (or not).
2. Who should I have fix that? I always ask this question of home inspectors, with dual motives. First, very often, the inspector’s response is - “What do you mean? You don’t need to pay someone to fix that. Go down to Home Depot, pick up a ___fill in the blank__, and here’s how you pop it in. Should cost you $15 - tops.” And that’s useful information to know - it eliminates the horror of a laundry list of repairs and maintenance items at the end of an inspection report to know that a number of them are really DIY-type maintenance items. Even buyers who are really uncomfortable doing these things themselves then feel empowered to either (a) watch a few YouTube vids that show them how it’s done, or (b) hire a handyperson to do these small fixes, knowing they shouldn’t be too terribly costly.
And even on the larger repairs, your home inspector might be able to give you a few referrals to the plumbers, electricians or roofers you’ll need to get bids from during your contingency period, which you may be able to use to negotiate with your home’s seller, and to get the work done after you own the place. Dropping the inspector’s name might get you an appointment booked with the urgency you need it order to get your repair bids and estimates in hand before your contingency or objection period expires.
And same goes for any further inspections they recommend - if neither you nor your agent knows a specialist, ask the general home inspector for a few referrals.
3. If this was your house, what would you fix, and when? Your home inspector’s job is to point out everything, within the scope of the inspection, that might need repair, replacement, maintenance or further inspection - or seems like it might be on its last leg. But they also tend to be experienced enough with homes to know that no home is perfect. Many times, I’ve asked this question about an item the inspector described as “at the end of its serviceable lifetime” and had them say, “I wouldn’t do a thing to it. Just know that it could break in the next 5 months, or in the next 5 years. And keep your home warranty in effect, because that should cover it when it does break.”
This question positions your home inspector to help you:
•understand what does and doesn’t need to be repaired,
•prioritize the work you plan to do to your home (and budget or negotiate with the seller accordingly),
•get used to the constant maintenance that is part and parcel of homeownership, and
•understand the importance of having a home warranty plan.
4. Can you point that out to me? Often, when you attend the home inspection, you’ll be multi-tasking, taking pictures of the interior, measuring for drapes or furniture, even meeting the neighbors, or fielding several inspectors at a time. Worst case scenario is to get home, open up the inspector’s report and have no clue whatsoever what he or she was referring to when they called out the wax ring that needs replacement or the temperature-pressure release valve that is improperly installed.
Your best bet is to, at the end of the inspection and while you’re all still in the property, just ask the inspector to take 10 or 15 minutes and walk you through the place, pointing out all the items they’ve noted need repair, maintenance or further inspection. When you get the report, then, you’ll know what and where the various items belong. (One more best practice is to choose an inspector who takes digital pictures and inserts them into their reports!)
5. Can you show me how to work that? Many home inspectors are delighted to show you how to operate various mechanical or other systems in your home, and will walk you through the steps of operating everything from your thermostat, to your water heater, to your stove and dishwasher - and especially the emergency shutoffs for your gas, water and electrical utilities. This one single item is such a time and stress saver it alone is worth the lost income of missing a day of work to attend your inspections.
Monday, July 18, 2011
Monday, March 28, 2011
Homeowners and tax benefits..
For many homeowners, the tax benefits are still offering relief in this tough economic time..
Tax Time Less Taxing for Home Owners
Washington, March 15, 2011
“Owning a home offers myriad benefits throughout the year, but some of the financial advantages of home ownership are most apparent at tax time,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “As many of today’s hard-working American families are feeling a financial squeeze, the tax benefits that can come from owning a home can be a welcome relief.”
A number of tax deductions and credits are still available for home owners; these include deductions – with specific limits – for mortgage interest and capital gains on home sales, and credits for certain energy-efficient home improvements. Even with these benefits, home owners pay 80-90 percent of all U.S. federal income taxes.
“It’s been suggested that many of today’s tax incentives for home ownership primarily benefit wealthy individuals, but that’s simply not true,” said Phipps. “As today’s public debate continues about what home ownership means for families, communities, and the nation’s economy, there’s no question that for many, owning a home is still the best way to begin building wealth.”
Ninety-one percent of home owners who claim the mortgage interest deduction earn less than $200,000 a year, and the ability to deduct the interest paid on a mortgage can mean significant savings at tax time. For example, a family who bought a home in 2010 with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 4.5 percent, could save nearly $3,500 in federal taxes when they file this year.
“Realtors® see the very real positive impact of home ownership every day with our clients,” said Phipps. “Recent proposals to reduce or eliminate the mortgage interest deduction and remove government support of the housing finance market could have disastrous consequences for the economy, not to mention making it harder or nearly impossible for millions of families to own their own homes. We believe America must continue to invest in home ownership, for the future of our families and our nation.”
For home owner tax season tips, visit www.HouseLogic.com. HouseLogic is a free source of information from NAR that helps home owners maintain and enhance the value of their homes and engage in issues that affect their local communities.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
# # #
Tax Time Less Taxing for Home Owners
Washington, March 15, 2011
“Owning a home offers myriad benefits throughout the year, but some of the financial advantages of home ownership are most apparent at tax time,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “As many of today’s hard-working American families are feeling a financial squeeze, the tax benefits that can come from owning a home can be a welcome relief.”
A number of tax deductions and credits are still available for home owners; these include deductions – with specific limits – for mortgage interest and capital gains on home sales, and credits for certain energy-efficient home improvements. Even with these benefits, home owners pay 80-90 percent of all U.S. federal income taxes.
“It’s been suggested that many of today’s tax incentives for home ownership primarily benefit wealthy individuals, but that’s simply not true,” said Phipps. “As today’s public debate continues about what home ownership means for families, communities, and the nation’s economy, there’s no question that for many, owning a home is still the best way to begin building wealth.”
Ninety-one percent of home owners who claim the mortgage interest deduction earn less than $200,000 a year, and the ability to deduct the interest paid on a mortgage can mean significant savings at tax time. For example, a family who bought a home in 2010 with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 4.5 percent, could save nearly $3,500 in federal taxes when they file this year.
“Realtors® see the very real positive impact of home ownership every day with our clients,” said Phipps. “Recent proposals to reduce or eliminate the mortgage interest deduction and remove government support of the housing finance market could have disastrous consequences for the economy, not to mention making it harder or nearly impossible for millions of families to own their own homes. We believe America must continue to invest in home ownership, for the future of our families and our nation.”
For home owner tax season tips, visit www.HouseLogic.com. HouseLogic is a free source of information from NAR that helps home owners maintain and enhance the value of their homes and engage in issues that affect their local communities.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
# # #
Thursday, February 24, 2011
Foreclosures 26% of 2010 sales
This article didn't surprise me at all..When I search for properties for my buyers, a good percentage of them are either short sales or foreclosures. In order for market values to start increasing, these distressed properties have to get sold..it's a tough situation for sellers but for buyers, it can be the deal of a lifetime.
RISMEDIA, February 24, 2011—RealtyTrac, a leading online marketplace for foreclosure properties, released its Year-End and Q4 2010 U.S. Foreclosure Sales Report, which shows that foreclosure homes accounted for nearly 26% of all U.S. residential sales during the year, down from 29% of all sales in 2009 but up from 23% of all sales in 2008. The report also shows that the average sales price of these foreclosure properties was more than 28% below the average sales price of properties not in the foreclosure process—up from a 27% average discount in 2009 and a 22% average discount in 2008.
A total of 831,574 U.S. residential properties either owned by banks or in some stage of foreclosure—default or scheduled for auction—sold to third parties in 2010, a decrease of 31% from 2009 and a decrease of nearly 14% from 2008. Meanwhile, sales volume of non-foreclosure properties in 2010 decreased nearly 19% from 2009 and nearly 27% from 2008.
A total of 149,303 foreclosure sales were recorded in the fourth quarter, down 22% from the previous quarter and down 45% from the fourth quarter of 2009—despite a 21% monthly uptick in foreclosure sales volume in December. Mirroring the year-end statistics, foreclosure sales in the fourth quarter accounted for 26% of total sales, and foreclosure properties sold for an average sales price that was 28% below the average sales price of properties not in foreclosure.
“Foreclosure sales in the fourth quarter faced the twin headwinds of the expired home buyer tax credit—which began to stifle sales volume during the third quarter—and the foreclosure documentation controversy, which hit in the fourth quarter and temporarily froze sales of foreclosures from several major lenders,” said James J. Saccacio, chief executive officer of RealtyTrac. “Given those factors, it’s not surprising that in the fourth quarter foreclosure sales volume hit its lowest level since the first quarter of 2008.
“Still, foreclosures continue to represent a substantial percentage of all U.S. residential sales and continue to sell at an average sales price that is significantly below the average sales price of properties not in foreclosure—the result of a bloated supply of foreclosures and weak demand from home buyers,” Saccacio continued. “The catch-22 for 2011 is that while accelerating foreclosure sales will help clear the oversupply of distressed properties and return balance to the market in the long run, in the short term a high percentage of foreclosure sales will continue to weigh down home prices.”
Foreclosure sales by type
A total of 512,886 bank-owned (REO) properties sold to third parties in 2010—down nearly 32% from 2009—at an average discount of 36%, up from an average discount of 33% in 2009. REO sales accounted for 16% of all sales in 2010, down from nearly 18% of all sales in 2009 but still higher than the 13% of all sales they accounted for in 2008.
In the fourth quarter, a total of 95,683 REO properties sold to third parties, down 17% from the third quarter and down 43% from the fourth quarter of 2009. Fourth quarter REO sales accounted for nearly 17% of all sales during the quarter at an average discount of nearly 37%.
A total of 318,688 pre-foreclosure properties—in default or scheduled for auction—sold to third parties in 2010, down nearly 30% from 2009. Pre-foreclosure properties in 2010 sold at an average discount of 15%, down from an average discount of nearly 17% in 2009. Pre-foreclosure sales accounted for nearly 10% of all sales in 2010, down from nearly 11% of all sales in 2009 and virtually the same percentage of sales as in 2008.
In the fourth quarter, a total of 53,620 pre-foreclosure properties sold to third parties, down 29% from the previous quarter and down 49% from the fourth quarter of 2009. Fourth quarter pre-foreclosure sales accounted for nearly 10% of all sales during the quarter at an average discount of nearly 13%.
Nevada, Arizona, California post highest percentage of foreclosure sales in 2010
Foreclosure sales accounted for 57% of all residential sales in Nevada in 2010, the highest percentage of any state, but still down from a peak of 67% of all sales in 2009. Fourth quarter foreclosure sales accounted for nearly 59% of all sales in the state, up from nearly 54% in the third quarter.
Arizona foreclosure sales accounted for 49% of all sales in 2010, the second highest of any state but down from a peak of 54% in 2009. Fourth quarter foreclosure sales accounted for 55% of all sales in the state, up from 46% in the third quarter.
California foreclosure sales accounted for 44% of all sales in 2010, the third highest of any state but also down from a peak of 57% in 2009. Fourth quarter foreclosure sales in California accounted for 45% of all sales, up from 40% in the third quarter.
Other states where foreclosure sales accounted for at least one-quarter of all sales in 2010 were Florida (36%), Michigan (33%), Georgia (29%), Idaho (28%), Oregon (28%), Illinois (26%), Virginia (25%) and Colorado (25%).
10 states post foreclosure discounts of more than 35 percent in 2010
Ohio foreclosures sold for an average discount of nearly 43% in 2010, down from an average discount of nearly 47% in 2009, but still the highest of any state. Kentucky foreclosures sold for an average discount of more than 40% in 2010, the second highest of any state and up from nearly 38% in 2009.
Eight other states posted average foreclosure sale discounts of 35% or more in 2010: Tennessee, California, Pennsylvania, Illinois, New Jersey, Michigan, Georgia and Wisconsin.
RISMEDIA, February 24, 2011—RealtyTrac, a leading online marketplace for foreclosure properties, released its Year-End and Q4 2010 U.S. Foreclosure Sales Report, which shows that foreclosure homes accounted for nearly 26% of all U.S. residential sales during the year, down from 29% of all sales in 2009 but up from 23% of all sales in 2008. The report also shows that the average sales price of these foreclosure properties was more than 28% below the average sales price of properties not in the foreclosure process—up from a 27% average discount in 2009 and a 22% average discount in 2008.
A total of 831,574 U.S. residential properties either owned by banks or in some stage of foreclosure—default or scheduled for auction—sold to third parties in 2010, a decrease of 31% from 2009 and a decrease of nearly 14% from 2008. Meanwhile, sales volume of non-foreclosure properties in 2010 decreased nearly 19% from 2009 and nearly 27% from 2008.
A total of 149,303 foreclosure sales were recorded in the fourth quarter, down 22% from the previous quarter and down 45% from the fourth quarter of 2009—despite a 21% monthly uptick in foreclosure sales volume in December. Mirroring the year-end statistics, foreclosure sales in the fourth quarter accounted for 26% of total sales, and foreclosure properties sold for an average sales price that was 28% below the average sales price of properties not in foreclosure.
“Foreclosure sales in the fourth quarter faced the twin headwinds of the expired home buyer tax credit—which began to stifle sales volume during the third quarter—and the foreclosure documentation controversy, which hit in the fourth quarter and temporarily froze sales of foreclosures from several major lenders,” said James J. Saccacio, chief executive officer of RealtyTrac. “Given those factors, it’s not surprising that in the fourth quarter foreclosure sales volume hit its lowest level since the first quarter of 2008.
“Still, foreclosures continue to represent a substantial percentage of all U.S. residential sales and continue to sell at an average sales price that is significantly below the average sales price of properties not in foreclosure—the result of a bloated supply of foreclosures and weak demand from home buyers,” Saccacio continued. “The catch-22 for 2011 is that while accelerating foreclosure sales will help clear the oversupply of distressed properties and return balance to the market in the long run, in the short term a high percentage of foreclosure sales will continue to weigh down home prices.”
Foreclosure sales by type
A total of 512,886 bank-owned (REO) properties sold to third parties in 2010—down nearly 32% from 2009—at an average discount of 36%, up from an average discount of 33% in 2009. REO sales accounted for 16% of all sales in 2010, down from nearly 18% of all sales in 2009 but still higher than the 13% of all sales they accounted for in 2008.
In the fourth quarter, a total of 95,683 REO properties sold to third parties, down 17% from the third quarter and down 43% from the fourth quarter of 2009. Fourth quarter REO sales accounted for nearly 17% of all sales during the quarter at an average discount of nearly 37%.
A total of 318,688 pre-foreclosure properties—in default or scheduled for auction—sold to third parties in 2010, down nearly 30% from 2009. Pre-foreclosure properties in 2010 sold at an average discount of 15%, down from an average discount of nearly 17% in 2009. Pre-foreclosure sales accounted for nearly 10% of all sales in 2010, down from nearly 11% of all sales in 2009 and virtually the same percentage of sales as in 2008.
In the fourth quarter, a total of 53,620 pre-foreclosure properties sold to third parties, down 29% from the previous quarter and down 49% from the fourth quarter of 2009. Fourth quarter pre-foreclosure sales accounted for nearly 10% of all sales during the quarter at an average discount of nearly 13%.
Nevada, Arizona, California post highest percentage of foreclosure sales in 2010
Foreclosure sales accounted for 57% of all residential sales in Nevada in 2010, the highest percentage of any state, but still down from a peak of 67% of all sales in 2009. Fourth quarter foreclosure sales accounted for nearly 59% of all sales in the state, up from nearly 54% in the third quarter.
Arizona foreclosure sales accounted for 49% of all sales in 2010, the second highest of any state but down from a peak of 54% in 2009. Fourth quarter foreclosure sales accounted for 55% of all sales in the state, up from 46% in the third quarter.
California foreclosure sales accounted for 44% of all sales in 2010, the third highest of any state but also down from a peak of 57% in 2009. Fourth quarter foreclosure sales in California accounted for 45% of all sales, up from 40% in the third quarter.
Other states where foreclosure sales accounted for at least one-quarter of all sales in 2010 were Florida (36%), Michigan (33%), Georgia (29%), Idaho (28%), Oregon (28%), Illinois (26%), Virginia (25%) and Colorado (25%).
10 states post foreclosure discounts of more than 35 percent in 2010
Ohio foreclosures sold for an average discount of nearly 43% in 2010, down from an average discount of nearly 47% in 2009, but still the highest of any state. Kentucky foreclosures sold for an average discount of more than 40% in 2010, the second highest of any state and up from nearly 38% in 2009.
Eight other states posted average foreclosure sale discounts of 35% or more in 2010: Tennessee, California, Pennsylvania, Illinois, New Jersey, Michigan, Georgia and Wisconsin.
Existing-Home Sales Rise Again in January
With the holidays behind us, I can already see the real estate market activity picking up here in the Tidewater area. The phones are ringing again!!!
The uptrend in existing-home sales continues, with January sales rising for the third consecutive month with a pace that is now above year-ago levels, according to the National Association of REALTORS®.
http://www.realtor.org/press_room/news_releases/2011/02/january_above
The uptrend in existing-home sales continues, with January sales rising for the third consecutive month with a pace that is now above year-ago levels, according to the National Association of REALTORS®.
http://www.realtor.org/press_room/news_releases/2011/02/january_above
Monday, January 31, 2011
Buy! Don't Rent!
It's a great time to buy a house. Interest rates are still incredibly low and available homes are abundant. Personally, I can see the market is improving and business has really picked up. What great news!
A lender sent this article to me today and thought I'd share.
Homeownership Makes $ense
Bring on the buyers! At last, the housing market is beginning to make sense again. The ownership line is finally crossing over the rental line on the great Homeownership graph.
It is now more expensive to rent than to buy a home in 72% of major metropolitan areas across the US, according to the Trulia Rent vs. Buy Index released Monday.
This is due to rising demand for rentals and falling home prices combined with low interest rates.
Pete Flint, chief executive and co-founder of Trulia says: "Since the start of the Great Recession, many former homeowners have flooded the rental market… Following the principles of supply and demand, renting has become relatively more expensive than buying in most markets."
The index compared the median list price and rent paid for a two-bedroom home in 50 cities. It then assigned a price-to-rent ration to each city with 15 signifying a buyer's market and 21 or more signifying a renter's market. The space between the two numbers signifies a balanced market.
The cost to rent includes rent and insurance. The cost of ownership includes mortgage principal and interest, closing costs, property taxes, hazard insurance and any homeowner association dues.
Not surprising, the most affordable markets are Las Vegas and Miami where the price-to-rent ration is 6 and where the foreclosure rates have topped the charts. Las Vegas was atop the foreclosures list in Q3 with one in every 25 homes was in foreclosure.
The index reported that homeownership was cheaper in the metro areas of San Francisco, Seattle, New York and Kansas City, MO, all of whom had price-to-rent ratios over 21.
Other metros like Oakland, Sacramento, Los Angeles, Miami and Phoenix are experiencing elevated rates of unemployment or foreclosures and close economic centers with projected job growth are still more affordable to renters.
This is truly great news for the Housing Industry.
A lender sent this article to me today and thought I'd share.
Homeownership Makes $ense
Bring on the buyers! At last, the housing market is beginning to make sense again. The ownership line is finally crossing over the rental line on the great Homeownership graph.
It is now more expensive to rent than to buy a home in 72% of major metropolitan areas across the US, according to the Trulia Rent vs. Buy Index released Monday.
This is due to rising demand for rentals and falling home prices combined with low interest rates.
Pete Flint, chief executive and co-founder of Trulia says: "Since the start of the Great Recession, many former homeowners have flooded the rental market… Following the principles of supply and demand, renting has become relatively more expensive than buying in most markets."
The index compared the median list price and rent paid for a two-bedroom home in 50 cities. It then assigned a price-to-rent ration to each city with 15 signifying a buyer's market and 21 or more signifying a renter's market. The space between the two numbers signifies a balanced market.
The cost to rent includes rent and insurance. The cost of ownership includes mortgage principal and interest, closing costs, property taxes, hazard insurance and any homeowner association dues.
Not surprising, the most affordable markets are Las Vegas and Miami where the price-to-rent ration is 6 and where the foreclosure rates have topped the charts. Las Vegas was atop the foreclosures list in Q3 with one in every 25 homes was in foreclosure.
The index reported that homeownership was cheaper in the metro areas of San Francisco, Seattle, New York and Kansas City, MO, all of whom had price-to-rent ratios over 21.
Other metros like Oakland, Sacramento, Los Angeles, Miami and Phoenix are experiencing elevated rates of unemployment or foreclosures and close economic centers with projected job growth are still more affordable to renters.
This is truly great news for the Housing Industry.
Monday, January 10, 2011
Foreclosure and Short Sale Consequences
Foreclosure is an extreme measure when an owner is "upside down" on their mortgage. It should be the last resort when you are unable to make your mortgage payments as the consequences can stick with you for many years. This is a wonderful article describing foreclosure and short sales.
Consequences of Defaults and Foreclosures
by Carla Hill
The economy has put a strain on thousands of households across the nation. In these tough times, many homeowners are struggling in the face of foreclosure. What are the consequences of defaulting on your loan? And what can you do to prevent this loss?
One of the most startling impacts of a foreclosure appears on one's credit report. Your credit score may plummet by 200 to 300 points. In this economic climate, where credit lending standards are already tightened, you may then find it difficult to do everything from buying a car to renting an apartment. What's worse is that the notation of foreclosure stays on your report for up to seven years.
Next, you may owe the lender money. They backed a loan on a home worth X amount. If they sell your home at foreclosure for less than that amount, you may be responsible for the difference. Many states have laws protecting you against this action, but speak with an attorney to find out for what you may be liable.
Lately, after the sudden drop in property values in certain markets, investors have been guilty of strategic defaults. This is when an investor purposely defaults on a property, because the time it will take for them to recoup their money is perceived as too great. A word to the wise: courts are now ordering deficiency judgements in some cases, where the investor must pay the lender back their losses.
There really is no winner in a foreclosure. With homeownership comes increased family stability. The loss of a home can be a trying time on all members of the family. Beyond your own family, a foreclosure can mean lowered property values for your entire neighborhood.
Avoiding default and foreclosure is not always possible. If you are not able to make your payments, be sure to be honest with your lender. They may be able to present you with an alternative. In addition, here are a few tips to get you thinking.
1. Short Sale. A short sale occurs when a borrower is unable to pay their mortgage loan. Both the homeowner and lender consent to a short sale, which means selling the home at a moderate loss, avoiding foreclosure and its associated frees and havoc on credit reports.
2. Talk to your lender. They may be able to offer you programs, refinancing, or counseling that can help you avoid losing your home. Most banks don't want you to foreclose, as it would mean they take a loss.
3. Selling if not underwater. If you are not underwater on your home loan, meaning you don't owe more than you can sell for and owe, then now is the time to employ a real estate agent and get your home sold. Downsizing or even renting is a better option than ruining your credit for the next seven years.
4. Budgeting. There are non-necessities that can be cut out of your expenses. Cut down and live as simply as possibly. You may have more money than you realized!
5. Financial counseling. Defaulting is serious business. You would be wise to meet with a financial counselor to see if they can help you avoid losing your home.
6. Refinancing or loan modification. Your bank or lender may be willing to allow you to refinance. This can translate into lower monthly payments.
The bottom line is this. Defaulting on your mortgage has severe consequences. Try your best to balance finances before your mortgage becomes an issue. And be honest and upfront with your lender in the event that a default is likely.
Published: January 6, 2011
Consequences of Defaults and Foreclosures
by Carla Hill
The economy has put a strain on thousands of households across the nation. In these tough times, many homeowners are struggling in the face of foreclosure. What are the consequences of defaulting on your loan? And what can you do to prevent this loss?
One of the most startling impacts of a foreclosure appears on one's credit report. Your credit score may plummet by 200 to 300 points. In this economic climate, where credit lending standards are already tightened, you may then find it difficult to do everything from buying a car to renting an apartment. What's worse is that the notation of foreclosure stays on your report for up to seven years.
Next, you may owe the lender money. They backed a loan on a home worth X amount. If they sell your home at foreclosure for less than that amount, you may be responsible for the difference. Many states have laws protecting you against this action, but speak with an attorney to find out for what you may be liable.
Lately, after the sudden drop in property values in certain markets, investors have been guilty of strategic defaults. This is when an investor purposely defaults on a property, because the time it will take for them to recoup their money is perceived as too great. A word to the wise: courts are now ordering deficiency judgements in some cases, where the investor must pay the lender back their losses.
There really is no winner in a foreclosure. With homeownership comes increased family stability. The loss of a home can be a trying time on all members of the family. Beyond your own family, a foreclosure can mean lowered property values for your entire neighborhood.
Avoiding default and foreclosure is not always possible. If you are not able to make your payments, be sure to be honest with your lender. They may be able to present you with an alternative. In addition, here are a few tips to get you thinking.
1. Short Sale. A short sale occurs when a borrower is unable to pay their mortgage loan. Both the homeowner and lender consent to a short sale, which means selling the home at a moderate loss, avoiding foreclosure and its associated frees and havoc on credit reports.
2. Talk to your lender. They may be able to offer you programs, refinancing, or counseling that can help you avoid losing your home. Most banks don't want you to foreclose, as it would mean they take a loss.
3. Selling if not underwater. If you are not underwater on your home loan, meaning you don't owe more than you can sell for and owe, then now is the time to employ a real estate agent and get your home sold. Downsizing or even renting is a better option than ruining your credit for the next seven years.
4. Budgeting. There are non-necessities that can be cut out of your expenses. Cut down and live as simply as possibly. You may have more money than you realized!
5. Financial counseling. Defaulting is serious business. You would be wise to meet with a financial counselor to see if they can help you avoid losing your home.
6. Refinancing or loan modification. Your bank or lender may be willing to allow you to refinance. This can translate into lower monthly payments.
The bottom line is this. Defaulting on your mortgage has severe consequences. Try your best to balance finances before your mortgage becomes an issue. And be honest and upfront with your lender in the event that a default is likely.
Published: January 6, 2011
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