3 Things Homeowners Can Do When Their Home Is “Under Water”
The recent U.S. recession is the worst since the famous Great
Depression of the 1930s. Bankruptcy filings skyrocketed, the
unemployment rate was extraordinarily high and home values decreased
significantly from their 2007 highs. Many homeowners learned that they
owe lots of debt – a home that is worth less than what they owe on it,
no way to refinance and no way to sell the owe because of it. It’s
known as being under water.
Homeowners may feel like there is nothing more than can do except walk
away from the mortgage, allow the home to go into foreclosure and file
for bankruptcy. Still, there are other options to bankruptcy – and have
the home gone from their hands.
1 – Chapter 13 Bankruptcy
A bankruptcy is one way a homeowner can stay in the home – if that’s
what he/she wants. It’s done by filing a Chapter 13 bankruptcy, which
allows them to catch up on the missed payments and reduce the amount
they owe on their home. This is known as “cram down” and has numerous
benefits to help homeowners keep their home.
2 – Deed In Lieu Of
Foreclosure
A homeowner can give the bank the home, avoiding any foreclosure
process and the additional costs that are included such as:
- Collection costs
- Interest on the mortgage
- Attorney fees
This process is known as a “Deed-in-Lieu of Foreclosure” and, even
though many banks don’t like this option, it is an option.
It’s not uncommon for the bank to ask homeowners for small payments
toward the difference in the mortgage balance and the home’s value.
With the help of a knowledgeable attorney, negotiations regarding the
deficiency amount and the terms can provide homeowners with substantial
financial relief.
3 – Short Sale
Ina short sale, the homeowner is given approval from the bank to sell
the property to another part for less money than what is owed on the
home. This process isn’t very quick, and getting an attorney who has
experience with it can really help speed it up. When offers are made on
the home, the bank has the information the attorney has prepared to
give the homeowner quicker answer to sell or not sell the home.
A homeowner who is underwater and having financial issues should not
consider foreclosure based on the bank’s terms. Rather, with the
knowledgeable attorney, homeowners can negotiate a better deal with the
bank, stop any foreclosure process and give them some control during
the process.