If you are thinking of selling a home if you are behind on mortgage payments then Symmes Law Group can help discuss with you all of your options, including options to retain your home. I had the chance to discuss selling a home if you are behind on mortgage payments on 1150am KKNW New Urban Unlimited Radio show which you can listen to here:
The first thing you need to think about is whether you can afford the normal mortgage payments on the home moving forward and whether you still want to live in your home. This will likely determine your next steps. In Washington State most homes have appreciated rapidly and you may have significant equity that you cannot access due to the delinquency on your mortgage. Therefore, a refinance of the mortgage may not be available to you, despite having equity, but you may qualify for a loan modification through your current servicer.
Can I Qualify for a Loan Modification if I am Behind on Mortgage Payments?
An alternative to selling a Home if You are Behind on Mortgage Payments, is to apply for a loan modification with your lender. A loan modification is when your lender or servicer agrees to modify the current terms of your mortgage, typically allowing home owners to payments they missed on the back end of the loan while also lowering the interest rate you have on your mortgage. This can be easier said than done, as mortgage companies are not obligated to give you a loan modification but many will make a business decision that it is better to keep you in the home that it would be to foreclose as there are costs to the lender.
In order to qualify for a loan modification, mortgage servicers will require among other things, a completed application with your current financial information, your latest paystubs/profit and loss, tax returns, bank statements and hardship letter stating why you fell behind. Mortgage servicers are very picky about the documents they receive and if one box is missed on the application or the latest information is not provided in a timely fashion the modification application can be rejected. The mortgage servicer will among other things be looking to see if your circumstances have changes and you are a good risk to make your mortgage payments moving forward. Consumers can apply for modifications on their own or with the help of a loan modification attorney. In Washington state we also have the foreclosure fairness mediation which is recommended and requires you to contact and attorney or housing counselor and it prevents a foreclosure sale while the process is ongoing, local attorneys for the mortgage servicer, a third-party mediator and somebody of authority from your mortgage servicer participating in the process.
If your financial situation does not allow for you to make normal mortgage payment then applying for a loan modification will likely not be successful but it can help buy time to delay a foreclosure sale if applying through the Washington State foreclosure Fairness program.
Can Chapter 13 Bankruptcy Stop a Foreclosure Sale?
Yes, a chapter 13 bankruptcy can stop a foreclosure sale from moving forward, even if the case is filed on the day before the sale date, although it is not advised to wait to the very last moment. A chapter 13 bankruptcy is a 3–5-year repayment plan in which you must make up payments you are behind on your mortgage and also be able to make your normal mortgage payment in addition to a trustee fee and your normal living expenses at a minimum. There are many factors that may impact what you plan payments may be, but if you know you cannot afford the chapter 13 plan, bankruptcy may not be a good long term option for you. In the short term it could stop a foreclosure sale or buy you a few more months while you contemplate your options moving forward.
Should I sell my Home to an Investor if I am behind on Mortgage Payments?
Selling to an investor who may have solicited you or with the help of Symmes Law Group or to an I-Buyer through EXP Realty Express offers may provide you with instant cash in your pocket and a home you can just walk away from without having to think about anything which some sellers may prefer. With that said you should know that you would be leaving money on the table as most investors will likely at most pay you about 70% of the fair market value for your home. They will likely fix up your home and then sell if for a profit themselves.
Should I List my Home on the MLS if I am behind on Mortgage Payments?
Homes listed on the MLS are typically in the best marketable condition to maximize the value you may get for your home, but there is nothing stopping you from listing a home as is to get exposure. When you do list a home on the MLS there are buying and selling broker fees ranging from 3-6% on average. You also need to make sure your title is clear of any judgments or need to invest in making repairs to the home which could delay transactions due to failed inspections or buyers’ inability to get a loan if the repairs are not done. Attorney Richard Symmes is also a managing real estate broker and currently hangs his license with EXP Realty and can provide you with a market analysis to determine your home’s value and assist with listing your property for sale on the MLS if this is the route you choose. Attorney Symmes can also provide you with options to obtain funding to make repairs to your home if you home has significant equity.
What if I Owe More than My Home is Worth?
If you owe more than your home is worth to a lender or through other liens, you can still list your home on the MLS but disclose that you are trying to get your lender to agree to a short sale. This is when your lender agrees to accept less than the full balance on your mortgage balance in order to recoup what they can from the home sale and avoid the costs of a home foreclosure. You can hire Symmes Law Group to negotiate a short sale on your behalf or Richard Symmes as a real estate broker to list the property as a short sale on the MLS. If you are not approved for a short sale you may also contemplate a deed in liu of foreclosure, in which you negotiate with the bank to have them take back the property in exchange for the keys and forgiving the balance that you owe on your mortgage. Keep in mind that Washington State is a non-recourse state which means that borrowers will not be liable for collections on a first mortgage on a primary residence if there is a deficiency.
Should I Let My Home be Foreclosed Upon?
Home foreclosure is a typically something that happens once all of the other options have been exhausted. Once a home is foreclosed you will have at least 20 days to leave the home and if the home is sold for more than you owed on any mortgages or liens, you may be entitled to surplus funds which are deposited with the Superior court in the county you live in by the foreclosing trustee. If you do let your home go to foreclosure this will not be good for your credit score and may prevent you from buying a home in the near future post foreclosure sale.
If you live in Washington State, and have questions about whether you should sell your home or want to know about home retention options, give Symmes Law Group a call at 206-682-7975 or contact us to get the counsel you need.