The Wagner iTeam Real Estate - (719) 434-8346
In the current Colorado Springs real estate market many home owners are “under water” – they owe more than their home could possibly sell for. In several/many cases home owners have lost their jobs/income, etc and can no longer afford their current mortgage payments ON TOP of owing more than the home is worth. This puts people in a tough situation where they can either:
- Stop making their mortgage payments and let the home fall into foreclosure,
Read Also: Foreclosure SUCKS – You Have Options
- Apply for a loan modification and try to lower their monthly payments to something more manageable, or
- Try to sell the home in a short sale situation
Read Also: Why a Colorado Springs Short Sale is a Great Alternative to Foreclosure
If you are a homeowner in this situation and are trying to decide between #2 and #3 (above), here are a few things that you may want to consider.
A Loan Modification is Difficult to Qualify For
In the past 4 years of working with short sales and pre-foreclosures, we have only had ONE homeowner qualify for a loan modification. In most cases, banks push loan modification applications to determine the financial status of the homeowner. And, quite frankly, if a homeowner is in a financial situation to NEED a loan modification, they are not going to qualify FOR one. Vicious cycle. Sad.
Loan Modification Applications vs. Short Sale Applications
When you apply for a loan modification, you want to put your financial situation in the best light possible so that you will be seen, by your bank, as a good candidate. This can be difficult, seeing as you are probably NOT in a great situation … or else why would you be looking to modify your loan? Regardless, you will supply your bank with all the happy, sunshiney things you can possibly come up with to wooo your bank into accepting you. Kind of like a dating service – coming from one side of the honesty spectrum.
When you apply for a short sale, you are doing the complete opposite. Instead of woooing that hot chick or hunky guy, you are trying to make your date break up with you ASAP – coming from the other side of the honesty spectrum. You will be putting your financial situation in the worst light possible – airing out ALL of your dirty laundry in hopes that they will think that a short sale is the best option for you, and for them. And in doing this, you are hoping and praying that the bank will not go after you for any deficiencies.
Aye, There’s the Rub ( Or, “how the loan mod application will screw your chances at a short sale”)
In many cases, a homeowner will try to do a loan modification process first, and if/wen that fails, they will try for a short sale. Wrong Answer. If you JUST submitted a bunch of paperwork to your bank showing how wonderful you are, do you really think they are going to believe that, now, you are a financial train wreck and all of a sudden have to sell your home at a short sale and NOT be responsible for any deficiencies? … Hmmm. No.
Make Your “Foreclosure Avoidance” Decision Wisely
If you are in the unfortunate situation where you can no longer afford your house payment and want to avoid foreclosure, ask yourself these 2 important questions:
- Do you want to do whatever possible to STAY in your house?
If the answer is YES, then do whatever you can to either make more money, refinance your loan to a lower payment and/or qualify for a loan modification. (Remember, in most of these cases, you CANNOT BE BEHIND ON ANY PAYMENTS.)
- Do you just want OUT of your mortgage and move on to a more affordable rental or live with family?
Many people do not care enough about the actual house to try and salvage their mortgage. If this is the case, then DO NOT apply for a loan modification. Just hire a competent Colorado Springs real estate agent who has ample experience in selling/negotiating short sales and move on with your life.
Committing yourself (and your family) to just one of these routes will not only save you time (and energy) but will also give you a better chance at being successful in whatever avenue you decide to pursue.