Foreclosure Isn't the Only Option
First of all, if you’re having difficulty making your payments, but want to remain in your home, there may be help available under the Obama Administration’s Make Home Affordable program. Visit the Indiana Foreclosure Prevention Network website to see if you qualify for programs to modify your loan, therefore lowering your monthly payments.
If you’re currently behind in your payments, or struggling to make your payments and do not want to remain in your home, a Short Sale or Deed in Lieu may be a viable option.
Short Sale: When the sales price of a home will be less than the current mortgage balance the lender may be willing to work wth the owner on a Short Sale. For instance, a property is worth $200,000, but the homeowners owe $220,000 due to decreasing property values. With the bank’s approval, the homeowner may sell the property for $200,000 and often the bank will write off the $20,000 loss and not seek repayment for the deficit . Why would they do this? Banks are not in the business of selling homes. It costs tens of thousands of dollars for a bank to foreclose on a property and then re-sell it. It is often a good business decision for them to accept less from a short sale than to go through with a lengthy and costly foreclosure. For the homeowner, they can usually remain in the property through out the sale and avoid the embarrassment of foreclosure. There may also be credit report advantages to a short sale over a foreclosure.
Deed in Lieu: A homeowner can no longer afford their home and they sign it over to the bank in lieu of making any further payments prior to it reaching foreclosure. As with a short sale, this is usually less devastating to homeowner’s credit status , but many banks don’t want to participate. They don’t want to own homes. Therefore they are often more willing to work with a homeowner on a short sale.
In both of the above cases the bank will require the homeowner to be in communication with them and provide documentation which explains their current financial situation and why they can no longer afford the property. This is often called a “hardship letter”. In addition they will request other financial documentation such as bank and investment statements, Income Tax records, paystubs, medical bills, etc
Short sales are lengthy and complicated, so be sure to hire a real estate professional who has prior experience listing short sale properties and working with the banks. It is also recommended that you contact a tax attorney for advise on the legal and tax implications. The Hoagland Team has successfully sold short sale properties as well as represented buyers purchasing short sale homes in the Indianapolis and surrounding communties like Greenwood. Contact us if you have questions or would like more details. Additional resources are available on our website.