4 Myths Elk Grove Underwater Homeowners Should Know
Home values in Elk Grove are going up, and many struggling home owners are gaining equity in their property. But nearly 14 million U.S. homeowners remain underwater…with mortgages worth more than their homes. As many as 27% had a negative equity by the end of 2012.
Bob Hunt, broker at Keller Williams OC Coastal Realty and longtime member of the California Association of Realtor’s board of directors, explains the most common misconceptions held by underwater homeowners.
A “deed-in-lieu” of foreclosure, in which the lender agrees to take back the keys and lets you walk away, is better than trying to do a short sale. Now you can potentially get a few months of free rent!
Mortgage giants Fannie Mae and Freddie Mac recently came out with new guide-lines on deed-in-lieu of foreclosures. Now homeowners with hardships can turn over the keys and erase the debt, even if they are still current on their payments. Some who relinquish their homes can live in them for up to three months without having to make mortgage payments. HOWEVER–lenders ONLY approve deed-in-lieu transactions if there is a single loan on the property or multiple loans with the same lender. And even then they are reluctant to use that as an option for a homeowner. It’s better to do a short sale.
A bankruptcy prevents a foreclosure
A chapter 7 bankruptcy will at best delay, but not prevent, a foreclosure. Banks will typically wait out the case, then immediately proceed with the foreclosure upon discharge. Or, occasionally, the banks will petition the court to release the property even during the bankruptcy if it has no equity so they can proceed with the foreclosure. If the home has enough equity, it will be sold as part of the bankruptcy case, with the proceeds going to creditors.
Doing a Short Sale will require money from homeowners.
There is literally zero out-of-pocket costs to the homeowner to do a short sale and, in fact, they can often get cash back to help with moving expenses. Basically in a short sale, the seller’s lenders step into the shoes of the seller. Most of the closing costs on the seller’s side are picked up by the seller’s lenders. Short sale buyers should be prepared to pay an additional 3% above the asking price to cover any costs that the seller’s lender declines to pay. This includes agent commissions, escrow fees, title insurance fees, taxes, and even HOA transfer fees. They’ll only cover so much though, and the buyer will have to assume the rest. There are even programs available in Elk Grove where the lender will give cash back to homeowners who agree to a short sale.
A foreclosure absolves a homeowner of delinquent HOA dues
HOA dues are actually a homeowner’s personal obligation. Even after a bank forecloses on a property, the HOA can still sue the original homeowner to collect on any unpaid back dues. Now, with a short sale, it will often be fully paid off or settled as part of the short sale negotiations.
As with any sale of your home, there are going to be questions. We have seen it all, and are pro’s at dealing with short sale transactions! If you are considering doing a short sale on your home in Elk Grove, call us and we will be happy to help you get started!
916-405-5765 or info@ModeandDurhaM.com
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