Blog

Thinking about a short sale so you don’t have to go into foreclosure?  Think again.  The following article talks about how loan modifications could be the right choice for most homeowners.  Find out why below.

The popular answer to a lender demanding payment or foreclosure has become You should do a short sale. I am a Real Estate Broker, a Home Builder and a Mortgage Loan Originator and I think this tactic is absurd. I really don’t understand this advice from the Borrower or Homeowner’s point of view.

The scenario is probably something like this: You, the borrower, were given a bad loan which unknown to you was going to graduate to a higher interest rate and a higher monthly payment making your new payment unaffordable; or maybe you have had unforseen medical bills or other catastrophic events making your current payment unaffordable; or an income change, such as a loss of job or income.

But, everyone needs to understand that the problems with the current economy are very well documented in the news, on the internet, or self experience. Your Lender knows your problem better than you do, and they don’t want your house. They can’t afford to take on so many foreclosures and short sales properties. They are not equipped to deal with the mountains of property, and that by law, they can’t keep or make a profit on anyway.

What your Lender needs is a paying borrower who is current. What does this mean for you? Your Lender actually wants you to keep your house. They don’t want to foreclose and they don’t want you to “short sale” your house. If they believe your situation is so bad that you can’t make any payment at all, then they have no choice. But, can you make a lesser payment? Has your income situation straightened out and now you can make payments, but you can’t catch up the payments you have missed?

If this is true, then your Lender wants to help you. Not, out of the goodness of their hearts, but because it makes good business sense. They will lose a lot more money taking your house and trying to sell it in today’s low sales market. When this happens your home is going to be worth less to you or your Lender. If this is true not why would you be asked to sell your house for less than you owe (“short sale”). Your Lender will lose less money if they help you keep it, and so will you.

If you know how the system works, it is very easy to Stop Your Foreclosure process and get a Loan Modification that fits your current situation. You are very certain to keep your house, but get a lower payment and have your missed payments put back into your loan, so that you can spread out this repayment over 30 years, or so. No money out of your pocket, except your next payment, which will be lower and you can move like before in your home, as if your money problems never happened.

So, why are realtors and others saying you should short sale instead of taking a foreclosure? Why aren’t they offering you the idea of “Loan Modification”? Because, they make a real estate commission from any sale of your home. Short sale or not, this realtor will make a real estate sales commission.

How do I know? I am a realtor, builder and mortgage loan originator. I would never recommend a short sale. Why? They take a very long time. It is a humiliating process. It is an emotionally draining experience. It has a negative affect on your credit score (not quite as bad as foreclosure), that is similar to foreclosure.

It just isn’t worth the damage that you and your family take on personally. Besides, your Lender would rather you do neither. They don’t want to see a short sale or a foreclosure. Your Lender would rather just change your current loan terms, to terms you can afford and let you stay in your home. The only person that would recommend you do “short sale” of your home is someone getting a commission.

You could contact your Lender yourself and hack your way through the process. The process is not difficult to understand. The problem is that your Lender is having as many problems as you. I would recommend that you do it yourself if you have experience with the Lending System and are familiar with how it works.

It your are not familiar, I recommend getting a professional to help you negotiate. But, there are good and bad “Loan Modification Negotiation” companies. You should talk very carefully with the company you choose. Ask questions. Get references of their success from clients who recommend them.

But, don’t consider either a foreclosure or a short sale, unless your situation is so desperate that you cannot possibly make any payment now, or in the future. I negotiate “Loan Modifications” for a living.

I assure you that this is the best possible answer to what you should try to do if you are behind on your loan and the Lender is beating you up with mail and calls. With a loan negotiator, you will not need to talk personally with your Lender. You will probably get the chance to keep your home. This is much better than the two painful strategies of foreclosure or short sale.

Article by Danny Hammond

Danny Hammond is a self made expert on all things real estate. Danny is a Real Estate Broker; Home Builder, and former Mortgage Company Owner. He currently is an author who writes about answers to the current recession and how this economy affects home owners. He is also a partner in a Loan Modification Company that specializes in Stopping Foreclosures; Loan Modification; and Credit Repair.