This is way overdue…
Foreclosure. Notice of Default. Short sale.
These are terms not everyone is familiar with. And these are terms some people are only too familiar with. Depending on which side of the fence you sit.
I’m in a position, right now, dealing with all of these situations. Now you must know that I learned this business in this type of market. Back in the roaring early 90’s… I was living in a different area but the situations were the same. I cut my teeth, so to speak, listing, marketing and selling REO properties.
REO properties are “real estate owned” which means that banks and other lending institutions are the owners and this is really a plus for people looking to invest in real estate. There is no emotion here – just numbers. If the numbers work and the buyer qualifies for the loan a great deal can be had. You see them advertised as foreclosed, bank-owned properties waiting for new owners.
Now if you’re on the other side of the fence – and perhaps you’re behind in payments with a notice of default looming, please know that you have options. Do not and I repeat, do not bury your head in the sand. Call your bank – they will generally work with you to save your home. Keep in mind, banks don’t want to foreclose – it costs them money. They don’t like that. And you have options. Sometimes, they are willing to adjust the interest rate – maybe refinance. They’ll even “suspend” payments if you need a couple of months to catch up. These payments will be tacked on to the back of the loan but it gives you time. Talk to them – it’s worth the trouble. Having a foreclosure on your credit report is NOT a good thing.
Now comes the explanation on short sales. Say you owe more money on the property than it’s worth if you were to sell it today. For people who plan to live in their homes for ten to twenty years, this isn’t an issue. Property values go up and down as life does. But if you have to sell for any number of reasons, job transfer, job loss, illness, etc. you’re house may go on the market as a short sale. This means that the bank would need to approve the sale and take less than is owed on it. Now you walk away from the loan but not the tax liability. The bank will probably send you a IRS 1099 for the difference and you will owe taxes on that amount. You took out the loan and didn’t pay it all back. That’s the story.
There’s no free lunch.
There is, however, opportunity here. For the buyer and the seller. Do your homework. Take a look at your options. Real estate is a sound investment. Save yours.
