Don’t Jump on the Foreclosure Bandwagon… Just Yet

Here is a quick summary of the article in case you just don’t have the time.  Too many people are going straight into foreclosure without even attempting to sell their home.  If you get it, then no need to read further.  For the rest of us, here is the long version:

I get more calls than you might believe from distressed home owners wanting to know the ramifications of bankruptcy or foreclosure on their credit.  The short answer is that it is devastating (actually, that will work for the long answer as well).  After some probing questions, I can usually figure out if a foreclosure is forthcoming or if it is something that can be put off for a while.  Most of the time, with some guidance, it can be postponed for more favorable alternatives.

There is no shame in foreclosure or bankruptcy.  Both are a necessary tool to aid the debtor in restructuring their lives.  My argument is that these processes may not be a foregone conclusion so let’s not jump off the cliff of financial despair just yet.  Look at it as a sliding scale of consequences.  Or perhaps in other terms: loss mitigation.  From good to bad to worse:

1.  Are you having trouble keeping up with the payments but are still paying on time?  Perhaps it is time to try and bail yourself out before things get worse.  Call a professional and put that “for sale” sign in your yard now!  This is probably one of the harder steps to take though the one with the least amount of consequences.  Nobody wants to admit financial distress with a big fat sign in the yard.  But another way of looking at it might be “financial prudence.”  You might be making the biggest, most positive step in rescuing yourself before you even need rescuing.

2.  Have you missed payments or are slowly falling behind?  Now it is time to look at a short-sale.  Just as it sounds, you are going to attempt to sell your property for less than what you owe.  It is a difficult and time consuming process.  But the payoff can be huge; preventing foreclosure.  This is going to take a seasoned and professional real estate agent (ahem…) to help you out.  Start the process sooner rather than later to allow yourself as much time as possible.

3.  Foreclosure.  You can’t make the payments and you are unable to sell your home in time.  Did you try working with the lender first?  Maybe you are close to a sale but need just a little more time.  Ask your lender for a “stay.”  You will need to provide sound evidence as to why you need more time, but you will never know unless you ask.  Other than that, you can expect to see your property auctioned off on the court house steps to the highest bidder. 

4.  Bankruptcy.  Make sure you are fully aware of what you are getting into prior to entering into bankruptcy.  It is not always the panacea that many debtors believe it to be.  Will your debts be dissolved or will you set up a repayment plan?  Can you stay in your house or will that be lost to foreclosure (the double whammy).  Consult your attorney with questions as you navigate these waters.

Times are tough in many parts of the country.  That isn’t to say that some areas aren’t booming with strong, local, economies.  However, most will agree that as a whole, the market isn’t what it used to be.  Plan ahead! 

Finally, this comes from recent, tragic, experience with a distressed homeowner, “keep it all in perspective.”  There are so many things in life that are far more valuable than your house.  Do what you can to preserve your home.  If you can’t save your home, don’t forget to save yourself. 

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