Under water? Can’t afford your mortgage payments anymore? Short Sale as Foreclosure Avoidance Tool best for some Homeowners

According to yesterday’s issue of the Puget Sound Business Journal, about 16 percent of all residential properties with mortgages were in negative equity at the end of the year in Washington State.

Negative equity means the homeowner owes more on the home than the home is worth.  This  can occur because of a decline in real estate value and/or  an increase in mortgage debt.

In Washington state, there were 3,288 foreclosure filings  in November of 2009, with one in every 835 housing units receiving a foreclosure notice — a 15 percent increase from November 2008.

Today, the Seattle PI reported more bad news about the Labor Market.  According to the PI, it was the second straight week that claims rose unexpectedly.  High unemployment remains one of the biggest obstacles to a sustained economic recovery.

In short, the economy is still shaky and more and more homeowners are struggling to make their mortgage payments and feel stuck because they know they cannot sell their home at a price that will cover their mortgage.  Depressed, scared and uninformed about their options, many wait until the bank forecloses and evicts them from their home.

For some homeowners, a short sale may be the option they are looking for. A real estate agent may be able to sell their home in a short sale which means the bank allows them to sell their home at market value and forgives some of their mortgage debt to make the sale possible.

Each situation is different and there are no guarantees. If anyone says they can guarantee a successful short sale or charges you upfront, nonrefundable fees to negotiate a short sale for you — run!

Generally, a short sale is better for a homeowner than a foreclosure. The ramifications of a short sale on your credit history are much less severe than with a foreclosure. If you are looking to apply for an apartment and you have a foreclosure and bank eviction on your history, you may have a hard time finding a rental. Bad credit will also affect your insurance rates, employment opportunities, etc.

Your eligibility for a new home loan will be affected more gravely with a foreclosure on your record. Underwriting and qualifying guidelines for mortgages change all the time but with a short sale on your record you may qualify for a new loan in a couple of years, whereas a foreclosure may keep you from buying a new home for 6-7+ years.

If you are in the Greater Seattle Area and want to talk to an agent about selling your home as a Short Sale, please contact the Brooks & Heinze Team for a free, no-obligation consultation.

Kerstin G. Brooks
Brooks & Heinze Team
Skyline Properties, Inc.
Ph: 206.276.5827
Email: info@propertyinseattle.com

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