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Distressed Homeowners: Focus on the Numbers, not the Distractions

THE FOLLOWING ARTICLE APPEARED JAN. 23, 2011,
IN THE RIVERSIDE PRESS-ENTERPRISE

Homeowners having difficulties making their house payments face a confusing and treacherous path.

But committed to finding the right direction and guided by skilled advisers, they can emerge from their misfortune with dignity and financial future intact.

And they can re-enter the housing market while prices are still at the bottom.

Amid threatening lender phone calls and letters, and “experts” knocking on their doors and filling their mailboxes and front steps with free offers to help, finding the right path is critical.

So how do people caught in the whirlwind of noise and promises and distraction find the best solution to their problems?

It’s simple: They stay focused on the numbers.

The Best Deal

Despite what many consumers think, banks do not want to foreclose on any more homes.

Banks always look at the numbers, and statistics prove that foreclosure almost always nets the bank less money than other options available to a distressed homeowner.

The bank will foreclose if it has to, but usually only because homeowners don’t address their problems correctly or quickly enough.

In 2010, banks took back more than 1 million properties, according to online foreclosure marketer RealtyTrac. And they recorded nearly 4 million foreclosure filings on almost 3 million properties last year. All of those numbers were record highs.

But in the meantime, lenders also continued to streamline other solutions for distressed homeowners.

Loan Modifications

Banks do not like loan modifications. Why? Because of the numbers. Though permanent loan-mod approvals increased in the past year, success remains well below 25 percent, and re-default rates are well above 50 percent in the first nine months following a modification.

“Trial modifications,” however, have been a boon for banks. While modification applicants undergo a 90- to 180-day test period at a reduced house payment, the lender continues to collect money on a loan that previously was in default.

Some banks have been accused of approving trial modifications for applicants even though the applicants had zero chance of permanent approval. Meanwhile, the foreclosure process runs concurrently. And all too often, on the heels of a modification rejection letter comes a notice of foreclosure sale.

Short Sales

Banks love short sales because they almost always net a larger profit than if the bank is forced to foreclose on the homeowner.

The time and cost to foreclose, evict, take possession, repair, market and sell a property can mean an 8 percent to 12 percent decrease in the bank’s bottom line. Once considered “short” if completed in less than 12 months, short sales now can legitimately be negotiated in 45-60 days with another 30 days to close the transaction.

But they still can carry heavy consequences if not handled correctly by a seasoned negotiator who knows how to prevent banks from pursuing the homeowner for more money later.

1st vs. 2nd

Banks will pursue homeowners for the “deficiency” – the difference between what was owed and what the bank received – whenever possible.

As of Jan. 1, it is now unlawful in California for a lender in first position to pursue or collect a deficiency after a short sale on residential property, regardless of whether the owner lived in the property, even if the loan was a refinance. This law does not address loans in second position.

Some 2nd TD lenders still have the right and ability to go after a homeowner after a foreclosure. And that can be the obstacle that prevents a short sale – if the numbers don’t make sense for the bank.

In those cases, a seasoned and skilled negotiator may be the only solution to move forward without liability for the homeowner.

California is a non-recourse state and prevents a lender from seeking a deficiency judgment after the most common form of foreclosure.

Do Your Numbers Add up?

Homeowners who focus on the numbers and avoid the distractions can begin the process of finding the best solution to their problems.

The first step is find a proven real estate professional to help guide them through their options.

For a free evaluation to determine if a loan mod, deed-in-lieu, short sale or one of the many other alternatives is right for you, call 951-778-9700 today. There is no obligation. Or, for a free copy of the Brand-New Special Report, “9 Alternatives to Inland Empire Foreclosure,” call 1-800-941-1900, ext. 9003; email PE@DreamBigRealEstate.com, or visit www.DreamBigRealEstate.com.

(Brian Bean and Timothy Hardin are Realtors and Ambassadors for Helping A Million Homeowners, a nationwide organization that is committed to helping alleviate the financial stress that so many homeowners face today. They can be reached directly at Brian@DreamBigRealEstate.com.)

Brian Bean and Timothy Hardin
Real Estate Professionals
www.DreamBigRealEstate.com
www.IEShortSalePros.com
www.HelpingAMillionHomeowners.com

Short Sale Genius Elite

I’ve been specially trained to negotiate short sales with an emphasis on Deficiency Waivers

 

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If one advances confidently in the direction of his dreams,
and endeavors to live the life which he has imagined,
he will meet with a success unexpected in common hours.
 

 

Henry David Thoreau

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