With the state of the current housing market conditions in limbo, many San Diego home owners are being forced to make important, yet difficult financial decisions about their current housing situation. San Diego home owners who purchased or refinanced a property during the top of the housing market are finding themselves severely “upside down” on their home and struggling to make their monthly payments. Home owners in this situation are faced with a few options which include loan modification, short sale, or simply walking away.

 
Although, there are many loan modification programs out there now, these home loan modification programs can be somewhat costly and are viewed by some experts as a “band aid” solution. Over 50% of San Diego home owners who choose to modify their home loan into a fixed rate mortgage or lower interest rate end up defaulting on the loan shortly after. Many of these San Diego home owners who attempt to negotiate with the bank themselves end up getting frustrated and quitting. Others homeowners pay thousands of dollars to “loan modification specialists” to perform the process for them only to be denied by the bank and out thousands of dollars in non-refundable fees.

 
The small amount of San Diego home owners who succeed in performing the loan modification get relief from the worry of their interest rate adjusting and get to enjoy a slightly lower house payment but most still face a negative equity situation. Although, these home owners payments are now fixed and slightly lower than what they were paying, they can’t help but notice they still owe double the amount of the most recent comparable sale down the street. This thought eventually becomes too much for the homeowner to handle, and they end up resenting their loan modification decision and their home. These are the 50+% of the population that defaults after loan modification.

Those San Diego home owners who choose to walk away from their property or give the keys back to the bank get the satisfaction of no longer worrying about their interest rate adjusting or negative equity situations, but may not know the consequences of their actions. Fannie Mae just released new guidelines outlining when homeowners who foreclose, short sale, or claim bankruptcy may be eligible to purchase a home again. Many banks are also pursuing deficiency judgments for repayment which forces some people to claim bankruptcy on top of having the home foreclosure on their credit.
Performing a short sale of a home is not the perfect solution, but may be a better solution to a home owners housing woes. The damage to the homeowners credit is usually about the same as a foreclosure if the homeowner is over 60 days late on payments, BUT according to the new Fannie Mae guidelines, homeowners that choose the short sale process over the foreclosure process may be eligible to purchase a home again in just 2 years!

If you are even moderately upside down in your house, a short sale may be your best option. Modifying your loan may fix your payment but most likely not your negative equity. Don’t bank on that 30-50% equity loss coming back anytime in the near future. Forecasters haven’t even begun to speculate on when the peak home prices of “boom” years will return, which probably means they believe it won’t be anytime soon. The best solution may be to “cut your losses” now by performing a short sale and to spend the next couple of years rebuilding your credit so that you can re-purchase while the housing market cycle will still be near the bottom. Choosing to foreclose on your San Diego home now may keep you from being eligible for repurchasing for a minimum of 5 years, which also may be when housing prices will be on an upswing again. I don’t know about you, but I prefer to purchase items when they are at their lowest prices, not highest! You can still have a chance to purchase a home while the San Diego prices are low by choosing to short sale instead of walk away!

Contact me for an in house appointment to go over the short sale process in detail and to see if it’s the right solution for you.
I work with experienced 3rd party negotiators who have strong relationships with loss mitigators inside banks throughout the US. These negotiators do NOT require upfront fees from my clients. They strive to negotiate the best deal for YOU with your current loan servicer(s).

Speak to your tax person to see if a short sale is the best solution for your finances as tax implications apply. If you have a first and a second loan on your property, the second loan servicer may ask for a small payoff amount in some scenarios. We do our best to avoid this payoff through negotiations or to have the first loan servicer pay that amount. We also do our best to keep the loan servicer(s) from pursuing a deficiency judgment after close of escrow, but be advised that this scenario may arise after the sale of the home. I recommend speaking with an attorney about the pro’s and con’s of the short sale process.