Click Here for Foreclosure vs. Short Sale Chart Homeowner Consequences.Are you late on your mortgage payments or do you know someone who is? Is your rate adjusting and you do not think you will be able to afford the new higher payment? Do you have an investment property that is costing you more money than it is worth and its value has gone way down? Do you get butterflies in the bottom of your gut because you are not sure what you can do, or what options you have?     A Freddie Mac survey asking how home owners feel facing foreclosure found: 38% felt Scared, 35% Depressed, 9% Angry, 8% Embarrassed, 9% none of these. What is concerning is that 6 out of 10 homeowners facing foreclosure are not aware of lender options available to them. Many people make their biggest mistake by doing nothing. Please do not make that mistake. Before you let the butterflies carry you away read on, you likely have some options to work with. Perhaps there are ways to save your home? If not, then perhaps there are better ways than others to minimize losses and proceed. Which avenues will get you out of your undesireable situation the fastest and with the least amount of damage so that that you can move forward again towards the end of the rainbow?   I empathize with anyone who is facing potential foreclosure. I know it can be intimidating, confussing and uncomfortable. I have compiled this information about foreclosure and short sale in the hopes that it helps you make better choices and gives you hope for resolving your issues. Depending upon your situtaion, you may be able to use this information to save a lot of money and heartach without ever calling me. If that is the case, that is a silent victory for both of us. But if you want help, please do contact me.     FIRST STEP DETERMINE EQUITY If you are late or soon to be late on your mortgage payments, first determine how much equity you have in your home or property. To figure that out you need to know what your home is likely to sell for less the amount owed on it and the costs to sell it. Contact me if you would like free help determining a fair market price for you home.   If you want to get a ball park idea of what your home is worth go to http://www.maricopa.gov/Assessor/ParcelApplication/Default.aspx It will take you to the county assessors web page. Once you have your property entered, click on the similar properties tab to see a list of properties that have sold. Compare your property (realistically) to other similar properties based upon sq ft, lot size, year built, pool, garage, etc.   Once you know the fair market value of your home, you will next need to know how much you owe on it. You can call your lenders to learn payoff figures. If you have a second mortgage be sure to include that payoff also. You may then want to consider property taxes or tax liens, mechanics liens, HOA or any other liens that may be attached to the property. Those will need to be paid off before you can claim equity.   If you need to sell your home there are also the costs of selling, which would include Title Fees, Real Estate Fees & Miscellaneous.     Once you determine how much equity you have, you are in a better position to decide what direction to go next.     If you have appreciable equity, you want to find a way to capture it or preserve it. That can be done through possible refinancing (provided your credit is still in good standing and you have enough equity in your home), or by selling your home as soon as possible for the highest price possible so that the left over equity comes back to you. I suggest being very careful of offers to take over payments in exchange for title to your home. Or cash offers from investors that are low to value. There are more than enough scams going on in this high foreclosure market by people who are eager to take advantage of uninformed, scared people. The BIG POINT is, if you have APPRECIABLE EQUITY, PROTECT IT, with well informed decisions. Seek professional advice from Real Estate Experts, Loan Officers, Title Officers, Accountants, Lawyers. Beware of the SCAMS and beware of negligence. If you fail to do your homework, foreclosure processes including; legal fees, penalties, interest and so on, can waste away your equity very quickly. If you have equity in your home, avoid foreclosure. Foreclosure is next to scams in wasting your equity. Call for professional help, sooner than later. Every day you wait is costing you more and more money. If you believe you have equity in your home, call or email me today so we can get you started towards protecting that equity.   If you do or do not have any equity in your home or property here are a few more options to consider.   Alternatives to Foreclosure These are several alternatives or "work-out solutions" that you can explore with your lender: First and foremost, if you can keep your mortgage current, do so. But if you find you are unable to make your mortgage payments, you might qualify for a loan workout option. Check with your lender to see which option may be available. Some of these options may not apply to your loan if it is not insured by Federal Home Administration (FHA). If your problem is temporary - call your lender to discuss these possibilities: Reinstatement: Your lender is always willing to discuss accepting the total amount owed in a lump sum by a specific date. Forbearance may accompany this option. Forbearance: Your lender may allow you to reduce or suspend payments for a short period of time and then agree to another option to bring your loan current. A forbearance option is often combined with a reinstatement when you know you will have enough money to bring the account current at a specific time. The money might come from a hiring bonus, investment, insurance settlement or tax refund. Repayment plan: You may be able to get an agreement to resume making your regular monthly payments, plus a portion of the past due payments each month until you are caught up. If it appears that your situation is long-term or will permanently affect your ability to bring your account current - call your lender to discuss options: Mortgage modification: If you can make payments on your loan, but don't have enough money to bring your account current or you can't afford your current payment, your lender may be able to change the terms of your original loan to make the payments more affordable. Your loan could be permanently changed in one or more of the following ways: Adding the missed payments to the existing loan balance Changing the interest rate, including making an adjustable rate into a fixed rate. Extending the number of years you have to repay. Partial Claim: If your mortgage is FHA insured, your lender might help you get a one-time interest-free loan from your mortgage guarantor to bring your account current. You may be allowed to wait several years before repaying this loan. You qualify for an FHA partial claim if: Your loan is between 4 and 12 months delinquent. You are able to begin making full mortgage payments again. When your lender files a partial claim, HUD will pay your lender the amount necessary to bring your mortgage current. You must sign a promissory note, and a lien will be placed on your property until the promissory note is paid in full. The promissory note is interest-free and is due when you pay off the first mortgage or when you sell the property.   If keeping your home is not an option - call your lender to discuss these possibilities: Sale: If you can no longer afford your home, your lender will usually give you a specific amount of time to find a purchaser and pay off the total amount owed. You will be expected to use the services of a real estate professional who can aggressively market the property. Pre-foreclosure sale or "short sale": If you can't sell the property for the full amount of the loan, your lender may accept less than the amount owed. You may qualify if: The loan is at least 2 months delinquent You (or your real estate professional) can sell the house within 3 to 5 months A new appraisal (obtained by your lender) shows that the value of your home meets HUD program guidelines Assumption: A qualified buyer may be allowed to take over your mortgage, even if your original loan documents state that it is non-assumable. Deed-in-lieu of foreclosure: As a last resort, you "give back" your property and the debt is forgiven. This will not save your house, but it is less damaging to your credit rating. This option might sound like the easiest way out, but it has limitations: You usually have to try to sell the home for its fair market value for at least 90 days before the lender will consider this option This option may not be available if you have other liens, such as other creditor judgments, second mortgages, and IRS or state tax liens This information found at http://www.phoenix.gov/NSD/falter.html FACING THE LOSS OF YOUR HOME OR PROPERTY    Other than winning the lottery, inheriting money, marrying some money or coming up with money one way or another, you are facing the reality of losing your home. Not a very good feeling or prospect. So what next?      CLICK HERE FOR A CHART SHOWING SHORT SALE VS FORECLOSURE CONSEQUENCES SHORT SALE OR FORECLOSURE    SHORT SALE is the process of selling your home for less than what you owe the bank.   Why would a bank take less than what is owed? Because banks know that the longer and farther into the foreclosure process they go, the more money they stand to loose. Banks have to pay attorneys, staff, and court costs and so on plus they are loosing the monthly income on the loan, while their money it tied up.   For a bank to accept less than what is owed, they must be convinced that the offer is the best offer they are going to get in the current market, and that it is more money to them now than what they can get if they foreclose and sell the property themselves.     SHORT SALE PROS   1. You can stay in the home until it sells.  2. Stop the bank from calling you. The bank will be given a letter of authorization to call your Real Estate agent rather than you concerning your loan.  3. You may be able to qualify for a home loan in less time.  Refer to chart. 4. To minimize your deficiency loss, which is good for you and the bank? Banks can issue an IRS form 1099, for the $ deficiency, which is the same as income on your tax return. The greater the deficiency, the more income you have to show on your tax returns and the more taxes you pay. If the property is your primary residence you may qualify for the IRS Mortgage Forgiveness Act of 2007 http://www.irs.gov/irs/article/0,,id=179073,00.html Consult with your tax accountant or an attorney.   If you have a line of credit attached to the property, then you definitely want to minimize losses and payoff as much of it as you can. If there is a deficiency on the line of credit, the bank can pursue you for the deficiency even after the house sales or is foreclosed upon. The greater the loss, the more you end up paying in the long run. http://www.helocbasics.com/what-happens-to-a-heloc-in-case-of-default-or-foreclosure/ The sooner you get your home/property sold for the highest possible price, the sooner you stop the losses.    DEFICIENCY JUDGEMENTS     You may be wondering what the Bank can do when there is a deficiency on the loan payoff? In other words, what happens if the bank takes less than what is owed on the property in a short sale, or the bank looses a bunch of money on a foreclosure? Can they chase you for the shortage? Can they get a judgment to collect the unpaid balance, then garnish wages, lien other properties or assets and so on?    NO they can't, unless you have a line of credit attached to the property.   Here is a great web page that explains Home Equity Lines of Credit. http://www.helocbasics.com/what-happens-to-a-heloc-in-case-of-default-or-foreclosure/     If you don't have a line of credit the mortgage contract provides the bank the right to take the property back (foreclose) as their recourse. Arizona is a non-deficiency state. A lender may not bring a deficiency suit against a person who lost a property that is 2.5 acres or less at a foreclosure, provided the property was a single one-family or a single two-family dwelling. This is so even if the high bid at foreclosure was less that the balance due on the loan. However, in foreclosures against other types of property, a deficiency suit is allowed, but is limited to the difference between the balance owed and the fair market value of the property, and then only if the suit is brought within ninety (90) days of the power of sale foreclosure.  http://www.foreclosurelaw.org/Arizona_Foreclosure_Law.htm   So whether you choose to Short Sale or go through foreclosure, Arizona law protects you from lenders chasing you for shortages on the loan payoff. Laws dealing with the mortgage industry are dynamic, so who knows what the future holds for lenders and borrowers.   If after reading this far you are leaning towards doing a Short Sale for your home/property please call or email with further questions or inquiries. I hope to help in a considerate, professional way. I empathize with tough times. Had a few myself...   CREDIT REPAIR If your credit has suffered a few blows and you want to take steps to improve your score try this web site. http://www.veracitycredit.com/For even more information from Arizona Association of Realtorsclick here for an article entitled Guidance for Homeowners Facing Foreclosure