ResortQuest Real Estate

For many families, the state of the housing market and the national financial crisis has caused significant stress, pressure and heartache. Facing foreclosure can be one of the most devastating financial challenges a family can face. However, foreclosure may not be the only option and may be avoided. The following is a brief explanation of some of the solutions that may be available.

Reinstatement

The homeowner contacts the lender to get the total amount owed to the mortgage company to date and pays it. This solution will work up to the day before the final foreclosure sale.

	Requires no lender approval required
	The home owner must be able to come up with enough cash to cover all back payments, fines and fees.

Forbearance or Repayment Plan

The amount due to bring the loan current is payed back in payments over a period of time. This is usually done by making the mortgage payment plus a portion of back payments owed monthly.

	The homeowner does not have to come up with a lump sum of cash.
	The homeowner must be in a position to make the full payment plus back payments owed. Qualification for forbearance may be required by some lenders.

Mortgage Modification

The mortgage is reworked and payments are lowered by reduction of one or a combination of the following: the principal balance of the loan, the interest rate, or the term of the loan usually resulting in a lower payment.

	The monthly payment and possible the principal balance is reduced.
	Often requires qualification and full documentation.

Rent the Property

If the payment is low enough that current market rent will cover the payment, the owner can convert the home to a rental and use the income to pay the mortgage.

	The homeowner can keep the property indefinitely.
	Rent may not cover the full mortgage payment; when renting a property there are many issues that can arise, and the owner must move.

Deed in Lieu of Foreclosure

Homeowner returns the property to the lender bypassing the foreclosure process. Approval from the lender is required.

	In a successful deed in lieu, the lender may forego their right to a deficiency judgment.
	Owner must vacate property; the deed in lieu may be reported to credit bureaus as a foreclosure with high credit score impact.

Bankruptcy

While bankruptcy may be an option it may or may not be a solution to foreclosure depending on the state. If non-mortgage debts, such as credit card debt, are a cause of a monthly shortfall of making mortgage payments and personal bankruptcy will eliminate these debts, it may be a solution worth considering.

	No lender approval required.
	If the homeowner cannot afford their mortgage payment, a bankruptcy will not stop the foreclosure process, it will only stall it. Bankruptcy can be costly; it damages credit scores, and can only be declared once every seven years.

Refinance

If an owner still has good credit standing and has significant equity in the property, refinance may be possible.

	This will lower payments in some cases.
	In today’s market, a refinance almost always raises the payment, and the process is expensive.

Sell the Property

If the homeowner has sufficient equity, the property can be listed with a qualified Sales Associate that understands the foreclosure process in their area.

	Home owner avoids foreclosure and liquidates his/her equity.
	Often there is not sufficient equity to sell the property without negotiating a short sale.

Short Sale

If more is owed on the property than what it is currently worth, the home can be sold by hiring a real estate professional to list and sell the property through the negotiation of a short sale with the lender. The owner must have a financial hardship to qualify. A hardship is a material change in the financial stability of the homeowner between the date of purchase and the date of the short sale negotiation.

	Homeowner avoids foreclosure. The impact on credit score is not as severe as a foreclosure. A short sale is not reflected in public record as is a foreclosure, and many cases it will allow the property owner to avoid a deficiency judgment. The borrower may be able to qualify for a new mortgage in as little as 2 years as opposed to at least 5 years in the case of foreclosure.
	Short Sales usually do not happen quickly, it is a challenging process in which a homeowner is best served by contracting with trained real estate professional to guide the way.

Article written by ResortQuest Realtors Sissy Carroum, Jim Hibbard and Walter Michalke.

What Can the Distressed Properties Division Do For You?

For Buyers: Information and explanations of the current market climate.

For Sellers: Find possible solutions to avoid foreclosure.

Commercial Investors: Vital Information for informed decisions.

Asset Managers: Services and resources of ResortQuest.