Many of my clients are wondering what their options are when financing on their home-loan adjustments. Did you know that more loans will adjust in the next 24 months than have adjusted in the past 24 months? I want to share three stories with you so someone you know and love doesn’t get stuck in this situation and not have help.
A client of mine had lived in her home for 20-plus years; her partner left the home and the loan adjusted. When the household income was cut in half and the mortgage payment doubled, the owner didn’t know what her options were. It wasn’t until she got a notice of default that she and I talked about her true hardship and her options.
The loans totaled more than $700,000, and the property value had slipped to $550,000 to $600,000. Even if her income hadn’t changed, the bank still wouldn’t have loaned on the property as it had done in the past. With no equity left in the home, she decided to lessen the impact on her credit long term and do a short sale. The short sale would have less long-term impact on her credit while giving her peace of mind about when to get out. Since most escrows take 30 to 45 days, she would be able to plan for her family’s future and rent their next home in time with a comfortable exit from the current house.
I spoke with a friend recently, and he knows a neighbor who is waiting for his loan to adjust, and then he’s going to look at his options. While that may be a good idea for some, I would rather know all my options today than to wait to know the limited options available tomorrow. When there is an opportunity to dodge a bullet, I’ll take that option.
If a loan is going to adjust and you can’t make the new payments, wouldn’t you want to exit with your credit intact rather than sacrifice it because you didn’t know your options? I encouraged my friend to have his neighbor talk to a knowledgeable Realtor about his options. Then he can make an informed decision, even if it means he must stay put and wait.
Last week, I knocked on a door and the owner said, “I know I’m going to lose my home, and there’s nothing you can do about it.” He may be right. I can’t stop him from losing his home; however, I can tell him about his options of doing a short sale, which would affect his credit for 24 months as opposed to a foreclosure, which would impact his credit for five or more years. He may not care about credit today, but having more options in the future may be important. The owner decided to do a short sale, which in the long run was a more dignified exit from the property and will effect his credit for a shorter period of time.
Once again, we see the market catching people by surprise. Are you beginning to see that knowing your options can save you embarrassment as well as your credit? When you need more information than you have today, call your agent and learn your options so you can make an informed decision. We are here to help.
— Elaine Abercrombie, a broker with Village Properties Realtors, is president-elect of the Santa Barbara Association of Realtors. She can be contacted at elaine@villagesite.com.