When you are upside down on an investment, such as your home, it means you owe more than it is worth. Many homeowners in this situation are weighing their options, and often it comes down to taking one of two paths. They can either continue paying on a mortgage that may never allow you to make a return on your investment; or, walk away from the debt entirely, which is called a strategic default.
There are pros and cons to each scenario. If you do go ahead with a strategic default, you won’t have to worry about that giant, unaffordable mortgage hanging over your head. However, you will also suffer a huge decrease in your credit score, and you probably won’t be able to qualify for another mortgage for a while.
Financial expert Suze Orman, who normally argues for strict financial responsibility, offers some sound advice. She says that if you are upside down by only about 10 percent, keep paying on your investment because there is a light at the end of the tunnel. When you are facing a higher loss, contact your mortgage company and try to work out a refinance or a modified loan balance. If they refuse, try to get them to agree to a short sale. If they refuse to consider that option as well, you can go ahead with the strategic default and move on with your life.
Deciding whether to pursue a strategic default versus continuing to pay on an upside down investment is major decision, Stephen K. Hachey, a Florida real estate attorney, can help. Contact our office at 813-549-0096.
This post was written by Stephen Hachey. Follow Stephen on Google, Facebook, Twitter & Linkedin.
Homeowners who are considering a short sale of their homes received a much-needed reprieve last week. As part of the American Taxpayer Relief Act of 2012 (fiscal cliff bill), Congress voted to extend the Mortgage Forgiveness Debt Relief Act until December 31, 2013. This means that debt forgiven under short sales or loan modifications will not be considered taxable income.
Without the extension, homeowners who earned income from a short sale of loan modification, people who are likely struggling to pay their mortgages would have to pay taxes on top of that. While this would create a difficult scenario for the homeowner, it can also be challenging for real estate market. Faced with the possibility of paying taxes on debt discharge income, homeowners may decide to walk away from the property and force banks to foreclose. Real estate experts expect an increase in short sales because of the extension. These short sales are expected to help the real estate market recover from the recent financial collapse.
If you are considering a short sale of your home, urgency is key. The average time for short sale is around three months. Stephen K. Hatchey, a Florida short sales attorney, can guide you through the process. To receive a free consultation of your case, contact our offices at 813-549-0096.
This post was written by Stephen Hachey. Follow Stephen on Google, Facebook, Twitter & Linkedin.
Common sense might tell you that getting rid of your home in a short sale is pointless if you have declared bankruptcy. Once you are officially and legally bankrupt, you will no longer owe any money to the bank on your house. So, why bother with a short sale? When you short sell your home, there are negotiations and paperwork and closings. You probably think you don’t need the hassle.
Actually, there is a point to the short sale, especially if you ever want to buy another home. After you have straightened out your finances, you will probably want to get back into the homeownership game. In order to do that, you will need to qualify for a mortgage through Fannie Mae or Freddie Mac. Both agencies have a two year waiting period after a short sale. This may seem like a lot, but not when you compare it to the waiting period after a foreclosure, or a bankruptcy and a foreclosure. Those waiting periods can be a lot longer; anywhere from three to seven years.
If you have extenuating circumstances, you might be able to apply for an even shorter waiting period after a short sale. You may have a dramatic loss of income, a catastrophic financial event or something out of the ordinary that required you to declare bankruptcy and short sell your house. When you have the opportunity, do a short sale even when you are declaring bankruptcy.
While short sales can be complicated, help is available. Stephen K. Hachey, a Florida short sale attorney, can help you navigate this process and make the most of a difficult situation. Contact him at 813-549-0096.
This post was written by Stephen Hachey. Follow Stephen on Google, Facebook, Twitter & Linkedin.
