Distressed Homeowners Need to Know They Have Options

There seems to be a staggering number of distressed homeowners who are underwater with their mortgages these days and many of these distressed homeowners are making mistakes simply because they are not aware of the options they have or they fall prey to one of the many predatory "rescue" scams that distressed homeowners need to look out for.

The options a distressed homeowner has depends on if they hope to stay in the home or they don't wish to or can't stay in the home. If a distressed homeowner wants to keep and stay in the home their choices are:

Refinance ( I am listing options not probability here )

Mortgage Modification - may be able to reduce monthly payments by perhaps lowering interest rates for a time, with the principle remaining the same? (make lower payments on a still underwater house?)

Forbearance - may be a good option if hardship is temporary, such as a illness, minor injury or short period of unemployment.

Bankruptcy - may be able to keep house, seek legal counsel regarding individual case.

If a distressed homeowner doesn't want to or can't keep the home their choices are basically:

Short Sale - if the distressed homeowners cannot bring the loan current, the distressed homeowner may opt to short sell their home (with lender approval) for less than the equity in the home.

Deed in Lieu - lender may agree to avoid a costly foreclosure process.

Foreclosure - in real estate a foreclosure is similar to a repossession of personal property (only more costly and time consuming)

Bankruptcy

In any event this is not a do-it-yourself project, there are way too many parts (complicated parts) and to many mistakes that can be made without professional advice, you absolutely need to consult a tax adviser and seek legal advise regarding your individual circumstance regardless of which option listed above you are considering.

Also be very aware of predatory "rescue" Scams that prey on distressed homeowners, some red flags to look for are:

Large Upfront fees

Guarantees to stop foreclosure (who do they think they are?)

Telling you to transfer your title and/or execute a power of attorney

Forensic Loan Audit

Bait and switch

Rent to Own or Leaseback Scheme

Use common since, if it sounds to good to be true, guess what, it is.

If you like I can send you links to government agencies with more details of these scams as well as ways to report them if you feel you may be a victim just let me know.

In addition to tax and legal advice, it is a good idea to talk with a lender about the waiting period for getting a new loan for your next home after choosing one of the above options. And it is important to know what the current value is of your home.

If you don't know what the market value of your home is, you need to find out, if after you have evaluated your options you have decided to do a short sale of your home, you will need a realtor that has expertise in short sale negotiation (especially if there is a deficiency to negotiate with your lender) the realtor should also know the market where your home is. If you live in a subdivision larger than a couple hundred homes and they don't know what city your home is in or what school district your home is in do you really think they really know what the market is where your home is?

And no matter if you want to keep your home or not I cannot stress enough the importance of learning the possible tax ramifications, from possible capital gains (yes even if you see no money) to you under all scenarios from a tax professional as well as your legal rights and possible ramifications of any possible deficiency of the amount owned the lender by contacting a real estate attorney so that you can make informed decisions.

This information is for general informational purpose and not intended to be investment advise, and should be explained to you in detail. You should always consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.

Richard D Chapin, PLLC with Solutions Real Estate - Equal Housing Opportunity.
Having spent most of my adult life engaged in sales and marketing as well as a decade of preparing income tax returns for small businesses, individuals and real estate investors, I have for many years had knowledge and interest in real estate as it relates to rental properties, tax deferred 1031 exchanges, real estate investments held in a self-directed IRA and such, so it seemed a natural fit to become involved in sales and marketing of real estate.

I joined Solutions Real Estate because, with my background and interest in technology and the fact of Solutions being an industry leader in the integration of technology is what made Solutions Real Estate the best fit for me, a Certified Short Sale Negotiator, please click on the Short Sale information tab on my website: http://EVhomesOnline.com for more short sale information.