'Shortsales... get rid of debt'
Part two in a three part series on mortgage relief
July 14, 2010 - At the first sign of mortgage troubles, call your bank, says Carey Wilhelm, a Clarkston-based real estate agent and Orion Township resident.
"See what they can help you with first. Don't walk away. It won't fix itself," she said.
In the world of mortgage relief, Wilhelm says she believes wholeheartedly in shortsales.
|Carey Wilhelm stands in front of a home in Orion Township worth over $1 million. She helped sell in a shortsale for $425,000, saving it from foreclosure, she said. Photo by Megan Collier (click for larger version)|
A deed in lieu of foreclosure is OK, but don't go for loan modifications and especially not for foreclosures.
"I don't think it's right to do a foreclosure. There's so many options (borrowers) have besides doing a foreclosure," she said. "I personally feel people should do a shortsale because it gets rid of the debt. The bank knows your house isn't worth what you owe on it, but at least you're working with them, versus a foreclosure where you just tell 'em to 'Stick it.'"
She says lenders like shortsales more than foreclosures because it allows homeowners to maintain the home. In a foreclosure, that burden would be on the bank.
"You stay in the home, you maintain the home, and for the community, the home isn't left empty, the grass doesn't grow, there's not vandalism, they're not stealing the air conditioning units, they're not stealing the copper, the heat's on, the lights are on – there's a lot of positives. The banks take that into consideration," said Wilhelm.
She said a neighbor behind her house walked away from his home in the middle of winter. The pipes froze and broke, and the house flooded, making a mess in the home and at the bank.
Also, a borrower's credit – and purchasing power – isn't hit as hard in a shortsale as with a foreclosure, according to Wilhelm, who says shortsales might stay two or three years and foreclosures stay seven on your credit report.
She says she knew a man with a foreclosure hanging over his head who couldn't even rent a house because of his poor credit.
Plus, with a foreclosure, lenders have up to 10 years to go after deficient borrowers –recently extended from seven years.
"You know in your right mind that (lenders) are going to come after people on a foreclosure," said Wilhelm, noting that in the nitty gritty of lending, borrowers get money from the Federal Reserve, ultimately.
"Do you think the Fed. boys are going to sit there a take a (foreclosure)? No, because they don't have to. Wouldn't you, if you lent somebody money and they didn't take care of your asset?" she said.
Are there disadvantages to shortsales? Sure, says Wilhelm.
Say a borrower owes $260,000 on a house, but sells the house in a shortsale for $240,000, leaving a $20,000 deficiency. Sometimes the deficiency is forgiven, sometimes not – it all depends on agreements reached between the borrower and lender.
After 2012, if federal legislation isn't extended, borrowers would have to pay taxes on the $20,000 deficiency from the above example, if it's forgiven.
If the deficiency isn't forgiven, Wilhelm says she can't guarantee lenders won't come after a borrower.
"But, do you want them coming after you for $20,000 or do you want them coming after you for $260,000 (in a foreclosure)?" she asked. "We don't know, yet, what the ramifications are, because we don't know if (lenders) will be coming after people (with shortsales)."
She added, "In my opinon, (lenders) will probably go after people with foreclosures before they go after people with shortsales."
All in all, there is no, set-in-stone, perfect picture for a shortsale, said Wilhelm.
"Each one is unique because of people's individual circumstances."
But, if a borrower plans to get rid of his house through shortsale, find a realtor who really knows shortsales, not one who just says he does, says Wilhelm.
And expect the selling process to take from six months to a year.
Wilhelm recommends all borrowers to "hang on to your bootstraps." She predicts widespread mortgage troubles to last into 2012 and 2013.
And the troubles are across the board, no matter if a house is worth $1 million or $100,000 – the same burden is with all kinds of different demographics.
"I don't care what kind of underwear you wear, 'cause we're all putting underwear on the same way and we're all having problems," she said.
She also says to not bother with loan modifications – they don't work.
"It'd be like you going back in for a new loan. If you're having problems, you're basically going back in for a refinance to see if you can even afford a modification," she said.
Say a borrower's house payment is $1,300 a month, and after a modification, the payment becomes $1,000 a month. That's not a significant amount, says Wilhelm, and borrowers may still not be able to afford it.
"If you don't qualify for a $1,000 payment, modifications don't work, and it's useless for you to do it in the first place."
Reporter, Lake Orion Review