Short sale versus loan modification ... what's a homeowner to do? Yesterday I wrote a "sell house" blog, but what about keeping the home? After yesterday's blog, I received numerous messages asking for my opinion. One reader wrote:
My house is in the market, I am applying for load modification affordable home... What should I take? the short sale or wait for modification approval? Please give advise. Thank you so much. -N.
So basically, here is a homeowner who has applied for a loan modification under the Home Affordable Modification Program who is also considering becoming a Tallahassee short sale. The advice being sought comes down to one simple question ...
Do You Want To Keep The Home?
That's it. That's all. I do not know if the reader wants badly enough to keep the house.
Most likely, the reader ought to put a value on keeping the home, as financially it is not a difficult question to answer. I suspect more than a third of all Tallahassee home owners are "upside down" in their homes, so the decision to keep the home must consider the long-term ramifications of being "trapped" in a home.
Short Sale Check List
Anybody who has done a short sale in Florida, whether as a property owner, a home buyer, or as a REALTOR can tell you that the process is all about "hurry up and wait." Those of us who have done a lot of them will tell you that they are all unique, with definite rules to follow. Each bank, each home, and each situation are treated as unique encounters by the lender.
In order to help you understand your options when comparing a short sale to a loan modification, we have assembled this simple checklist as a guide to walk you through the decision making process.
- What is your true financial position in the home? - Take the time to meet with a short sale expert to determine what the realistic short sale value of your home is, and what you will be facing at closing (how short will you be). This will make a difference in the strategy that you choose.
- Do you expect to move in the next five years? - The duration of your stay in your current market area will matter greatly in your decision. Why fight to keep the house if you will be moving in the next couple of years? The posture of the banking industry could be far worse by then.
- How creative will your existing lender be? - A loan modification that reduces principal and reduces interest could put you in a desirable home ownership position. Do not assume that banks will not do this.
- Do you really (really) want to keep the home? - Is this home worth fighting for? Is it worth taking a long-term negative equity position in this home?
- If you sell, where will you move next? - How affordable is your current home versus where you will end up moving next?
- How will you feel about each possible solution? - There is a moral aspect of selling a home short or modifying an agreement that you already committed to following. Have you considered how you will feel if you do not perform as agreed?
Short Sale Information Is Vital
As with just about every topic that we cover at the Tallahassee Real Estate Blog, we believe that an informed decision is always part of the solution. Too often, we see people make decisions based upon assumptions about what might or might not happen. This is crazy.
If you are in a bad housing situation, talk to an expert who is active in the current real estate market. Though I have 20 years of experience, my experience with short sales over the past 3 years is far more valuable to a home seller today than my previous 17 years in "normal" markets. This means that you should not get caught up in the "how many years somebody has been in the business," rather focus on "how many distressed properties" they have worked with (both Sellers and Buyers).
If you would like to schedule some time to review your short sale situation, just drop me a note and we'll jump right on it. Also, I have listed some great short sale resources below.
Short Sale Resources
Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.