7 Proven Strategies to Avoid a Foreclosure and Save your Home
7 Proven Strategies to Avoid a Foreclosure and Save your Home
If you or someone you know is headed toward foreclosure, or are already in foreclosure, you need to know your rights and options now. Only then can you save your house… save your credit… and save your equity before it's wiped out forever.
By Steve Groom
Foreclosure can mean the loss of your home, any equity in your home, your credit rating and your dignity. Foreclosure is a very public process, with your name listed in the public court records and then published in your local newspaper. Then, once you are ready to move on with our life, your foreclosure appears on your credit report for at least 7-10 years. In addition, all mortgage applications currently ask if you have EVER had a foreclosure. You'll have to check "Yes" for the rest of your life.
A foreclosure usually means that you won't be able to buy another house for several years unless you agree to the exorbitant interest rates of "Bad Credit' mortgages which can be twice the rate of regular mortgages.
But what if you've experienced a temporary hardship? Life is unpredictable and we all experience circumstances in our lives that are unforeseen and that are out of our control. Often times these circumstances can prevent us from making our monthly mortgage payments on time. Some of the issues contributing to delinquency include:
" Job loss
" Medical illness or injury
" Divorce
" Death in the family
If you have experienced one of these situations it can severely impact your ability to pay your mortgage obligation. If you have experienced a temporary setback, you may have several options available to you to stop foreclosure. Here are several proven strategies to avoid a foreclosure:
1. Mortgage Modification- most often used if you have experienced a permanent reduction in income and can't afford a repayment plan. In this case, the terms of the loan may be adjusted (the interest rate is lowered or the term is extended) so that monthly payments become affordable.
2. Forbearance Agreement- typically used if you have experienced a temporary hardship that is now over and you can resume making your regular payments. A popular option when you can't pay all of your past due mortgage payments at once. Here the lender agrees to move your delinquent payments to the back of the loan.
3. Repayment Plan- the preferred method of most lenders. Here the lender agrees to let you catch up the back payments by adding a portion of the past due amount to each current monthly payment until the account is current again.
4. Mortgage Refinance- you may elect to refinance your delinquent loan with your existing lender or a new lender if you faced a temporary financial setback, had good credit prior to the setback, and can prove that you can now support the new mortgage payment. Usually not an option in other situation unless you agree to very high interest rates.
5. Deed in Lieu of Foreclosure- here you voluntarily convey the deed to your property back to the mortgage holder in order to prevent a foreclosure. By accepting the deed, the lender releases you from personal liability on the loan.
6. Sell your Home- you may choose to sell your house prior to the foreclosure auction. Lenders may postpone the foreclosure auction to allow you time to sell the home. If you are unable to work with your existing lender, or find a new lender, then it is time to get serious about selling. The longer you wait, the more likely you will need to sell your house quickly, most likely to an investor who will buy the house as-is and close quickly, but will pay less than fair market value.
7. Bankruptcy- filing bankruptcy will temporarily stop the foreclosure case. You can file anytime before the foreclosure auction. However, this should be your LAST option, NOT your first. Though it usually does not permanently end the foreclosure, it can interrupt the foreclosure procedure and buy you months or years without losing your property. Statistics have shown however, that approximately 85% of all Chapter 13 bankruptcy filings FAIL to permanently save a homeowner from foreclosure. This is because the reorganization arrangement typically requires the homeowner to make plan payments that are much higher than the original payments that they could not afford!
Bonus- here's 2 more!
8. Military Indulgence- if you are currently active in the U.S. military you are entitled to relief under the Soldiers' & Sailors' Civil Relief Act. Most lenders will not foreclose on you if you have been granted Military Indulgence.
9. Partial Claim Payment- there are a number of other programs available to you if your mortgage is FHA-insured. Under this program, HUD pays your lender the amount owed to bring your loan current. You then begin making your regular monthly payments. HUD records a 2nd mortgage against the property for the amount that they paid your lender. You do not have to pay the Partial Claim mortgage until you sell the house or the 1st mortgage is paid off.
In summary, the bottom line for stopping foreclosure is to know your rights and options; contact your lender and never ignore the lender's letters and phone calls; and most importantly, take action immediately. Ultimately, putting your head in the sand will not make it go away.
If you would like more information on how to save your home and save your credit, get our FREE Special Report explaining your rights in much more detail. This special report reveals:
" How to raise enough cash to bring your loan current…
" How to get a new mortgage to stop a foreclosure…
" How to sell your house quickly and easily if needed…
" What to do if you feel a foreclosure can't be stopped…
" What filing bankruptcy really does if you're considering it…
" Several options for creating a fresh start…
" How to recognize and avoid the scam artists…
About The Author:
Steve Groom, www.HomeSolutionsMD.com is offering a FREE Special Report entitled, "How to Stop Foreclosure & Get the Cash you Need Fast. Call the 24-hr. message line toll-free at 1-800-761-3424, ext. #21, or get it now at the website above.
Sell Your Income Property For More
Selling income property isn't like selling a house. You can paint a house, and get a little more because it looks nice. Rental property is different, because it's bought by investors, who look at income more than new paint. Raise income, and you increase value.
Let's assume investors in your area expect a capitalization rate of .08. That means that they want a net return (before loan payments and taxes) of 8% on the purchase price. If your three-plex generates $12,000 net income annually, they'll value it around $150,000 ($12,000 divided by .08). Make it generate $16,000, and you make it worth $200,000.
Get More Income From Your Income Property
Higher rents is the obvious way to boost income, if you can justify it. Find out what similar units are renting for. If you're $60 below the going rate, you can raise rents and not lose your renters. Raising the rent $60 for three apartments means $2160 more net income annually. At a .08 cap rate, you just added $27,000 to the value of your property.
Consider other ways to raise rents. Your tenants may agree to $30 more per month if you have a carport built. That's $1080 more net income annually, meaning roughly $13,500 more value added to your property. ($30 x 3 units x 12 months = $1080 divided by a .08 cap rate = $13,500) Build that carport for $4,000, and that's a good return on investment right? What else do they want?
Consider other ways to get more income. Rent storage sheds to tenants or put in a coin-operated washer and dryer. If you own a larger income property, you could install pop machines.
Reduce Rental Property Expenses
Can you add insulation to reduce the heating costs? If you're paying $80/month for lawn care, will one of the tenants do it for $40? Can you get cheaper insurance? Look for any ways you can reduce expenses. A new $4,000 furnace that saves $800/year on heating costs means you just turned $4,000 into a $10,000 higher sales price.
These things are never an exact science, and of course appearance and other factors matter. Increasing that net, though, is the surest way to get more for your income property. Just make the changes at least several months before you try to sell the property. Also, learn how do the math - it really does matter.
Steve Gillman has invested in real estate for years. To learn more, and to see a photo of a beautiful house he and his wife bought for $17,500, visit http://www.HousesUnderFiftyThousand.com
Selling a Home: Should you have an Open House?
Can anyone remember when open houses were not used to help sell a home? Help is the operative word, as holding an open house is not a primary marketing tool to sell a home. More and more agents are saying they are a waste of time, especially successful agents who feel like holding an open house is more like fishing for prospective clients than a potential buyer of the home being held open.
My personal experience is, as much as I would rather be doing something else with my weekend afternoon time, open houses have led to sales and new clients. The relationship of house sitting hours to finding a buyer or new client is not very good. For me, I would estimate it at about 65 to 75 hours per "catch." This means Open Houses may not be the most effective use of time for me or my sellers, but there are other reasons to consider them. You can't always count on agents to sell your listing. Sometimes agents don't know their clients well and don't show them a listing that might work for them. In addition as all agents know, clients change their minds and don't always tell us. A certain number of buyers find the home they ultimately buy on their own and often at an open house. Finally buyers sometimes will not make an appointment to see a house if the listing information is not exactly what they are looking for. This same buyer will stop at an open house because there is no commitment and may be surprised to find they like the house much more than they did when they were reading the listing.
Some sellers wonder if the Open House is worth the work and inconvenience. Some even complain that agents only do open houses to pick up clients, not to sell their home. Others worry about having items being taken from their homes. Other sellers expect their Realtor to hold open houses, so agents, regardless of their personal feelings about sitting on homes, will do what makes their client happy. "My seller thinks they're important, so I do them" is what many Realtors feel and say when it comes to open houses. But then there are sellers who wonder why they should open their homes to the public if most people coming through are not serious buyers. Preparing for an open house is a great deal of work because the house should be "perfect" and then you have to be away for most of a day, not to mention wear and tear on the house and the risk of theft. "You get Lookie Lou's trying to pick up some decorating hints and curious neighbors who always wanted to know how your house looks on the inside," said Eric Tyson and Ray Brown in their book House Selling for Dummies (Hungry Minds, Inc., 1999). One client who declined using the open house as a marketing tool said. "I don't want to lose control of who is actually coming into my home." Clearly not having open houses is easier for the seller and agent.
The opinions of Realtors/agents are as diverse as sellers when it comes to doing the Open House. One agent said people attend open houses to compare the house to the one they really want to buy, to gain a better understanding of what is on the market before making a decision, to see what their neighbors house looks like and finally to get decorating ideas. Since none of these is valuable to the seller he recommends avoiding the hassle of open houses.
So what are other agents saying about holding an open house? I found the following agent comments on the internet in various articles. "I do not see any need for open houses right now, houses are selling quite rapidly and sellers can focus on other items of importance." Another agent says she "very rarely" has open houses now because buyers shopping on the Internet can see pictures or take virtual tours of homes. But then there is this, "The open house is the best way to market a home, the more people we can get to look at their house, the more opportunity they have to sell the house and get top dollar for it." Here is one agent who says it pretty straight, "I don't believe in Open Houses. They rarely bring buyers." Here are a few more, "The more potential buyers you can get to view your home, the better chance you have to sell it" and "Open houses can provide instant feedback to sellers, as well as word of mouth once neighbors know it's on the market." And finally "I hold an open house when I have a nice house in a nice area; I don't like to hold them for homes when people are still living in them. I don't want to have to watch their stuff."
A survey conducted in Texas by the Real Estate Center at Texas A&M University (recenter.tamu.edu) says, "Although open houses are popular with sellers, they appear to be losing their appeal among agents. Sellers see the open house as an indication the agent is actively promoting the listing. Agents know, however, the odds are long that an open house will produce a buyer."
The National Association of Realtors polled agents and found that open houses led to only 7 percent of all home sales. Referrals were sited as the biggest sales factor at 29% of all sales. In a 2005 profile of Home Buyers and Sellers, also conducted by the NAR, 42% of home buyers found open houses to be "Very Useful" as an information source and 55% said they used open houses as an information source in their search but of the nine categories in the chart showing where buyers first learned about the home they purchased, open houses were not even listed.
The Texas survey which had 36% of all Certified Residential Specialist license holders in the state respond, found that 97% had held open houses but only 41% said they were effective. According to the article associated with the survey, "Survey Slams Door on Open House" (http://recenter.tamu.edu/pdf/1258.pdf), "While 32 percent agree that public open houses attract many potential buyers, 62 percent believe most people attending open houses are not serious buyers. In fact, three out of four (77 percent) of the respondents say most open houses are held merely to appease sellers." In addition the survey found that three out of four agents think open houses are effective in interesting buyers in homes other that than the one being shown.
The Open House has been a staple of selling homes for a long time and although we are seeing agent resistance and even data demonstrating they are not very effective I don't see them going away anytime soon. As long as there are sellers out there who see value or at least believe there is value in holding an open house, there will be agents who sit in houses on weekend afternoons.
Julie Jalone is an experienced professional Realtor® serving buyers and sellers of residential real estate in the Greater Sacramento area including Placer, El Dorado, Yolo and Yuba counties. Some of the communities served by Julie include Sacramento, Roseville, Rocklin, Lincoln and Granite Bay. She has been working with a wonderful couple from Iowa who are having a hard time with California prices and are worried about the "bubble." They really want a home but you can see them struggling with making the decision. It is just going to take more time! To learn more about Julie, take a look at her website, jalone.com, where you will find additional articles, monthly market analysis and her daily blog, "Keep it Real in Sacramento."