Options to Consider When Facing Foreclosure in Sacramento, California
If you fall behind in your mortgage payments you will receive a lot of mailers offering to help you get out of your unfortunate situation. There are options to avoid foreclosure in Sacramento. Many of these people are looking to take advantage of someone in a difficult situation. Often, the reason someone falls behind on their mortgage is due to a situation they had little control of. The Hoyt Group is here to work with you and make sure that before you do anything, you know all of your options. We have helped many clients work through difficult issues with their home and help them find the solution that makes the most sense.
The # 1 thing you need to make sure you never do is sign anything you are not familiar with. DO NOT SIGN anything with ANYONE offering a service that seems too good to be true. Many people are forced into doing something they don’t understand and it often puts the homeowner in a very vulnerable position. Don’t Do It, Don’t Sign Anything!
Options – Foreclosure – Real Estate -Help in Sacramento
Here Are Several Options to Consider
Option # 1 Sell Your Home
Depending on the market and area you live in, you may consider selling you home if you have enough equity to pay off your existing liens. However, you may not be able to do a regular sale if you owe more than what your home is worth. Using an experienced Realtor that works closely with banks will give you the time needed to sell your property at the highest price possible. We can help with this process and provide our 30 plus years of real estate experience.
Option # 2 A Short Sale – Not a Typical Sale
If your home is worth less than what you owe on your mortgage, a short sale may be the best option for you. Instead of just walking away from the property and severely damaging your credit, a short sale will allow The Hoyt Group to negotiate with your bank and get a short sale approved and closed. Not everyone will be approved to do a real estate short sale. Banks are not eager to take a loss on their investment but they also realize that if they take the home back through the foreclosure process they will likely take a loss equal or greater to this amount. A short sale allows the bank to take the loss and move on because essentially, the banks do not want to own real estate.
The Hoyt Group in Sacramento works directly with the bank to show them this may be the best option available. It is likely in this current real estate market, that the bank will approve the short sale and accept the loss in order to avoid taking a larger loss if the property were to come back to them as a foreclosure.
The bank will be very selective in what they pay for when you sell your home through a short sale. You need to be aware of the downside of doing a short sale and what the tax implications may be. Despite a short sale having some downsides, the positives of this can still out weigh the negatives of losing your home through a foreclosure.
The Mortgage Forgiveness Debt Relief Act of 2007, also known as Section 2 of H.R. 3648 was passed to eliminate the short sale tax consequence of having to pay the additional tax that would be due on the loss to the bank. Basically, any loss to the bank would be treated as ordinary income to you because what was a loss to the bank became a gain to the former home owner. Keep in mind that this will eliminate the federal tax but you still may owe money to the state. You will need to speak with your tax professional to know what the consequences will be for your current situation. For more detailed information about The Mortgage Forgiveness Debt Relief Act of 2007, Section 2 of H.R. 3648 please refer to our page on this bill. Please feel free to call us with any questions and what your options would be. We can help you with a short sale in San Diego County.
If you are outside of Sacramento please refer to our list of short sale real estate agents to find an agent in your area.
Option # 3 Refinance Your Home
Refinancing your home and paying off the existing loan sounds easy and it may be an option that you have already pursued. In this current real estate market it has become almost impossible to refinance your home if you have less than 10-20% of equity. We may be able to show you some loan options that you have not been presented with but it’s probably likely you have already explored this option and will not have many if any refinancing options available. The Hoyt Group works with many different lenders and has access to many different types of loan programs but the refinance market has become very limited. Because we have a full service mortgage division we may be able to offer you an option that will allow you to refinance and pay off any existing loans. Contact Us today, we would be happy to provide you a quick, accurate loan quote. If your ultimate goal is to stay in your home and you can’t refinance your home your best option may be a loan modification.
Option # 4 Negotiate a Forbearance Agreement
Typically, a forbearance agreement is accepted by a bank when someone can show they had a temporary hard ship and this is the reason they fell behind in their mortgage payments. It has become fairly common and something that The Hoyt Group can help you with. Two items a bank will look for when they consider a forbearance is the reason you fell behind in your mortgage payments, proof that your financial difficulties were a one time occurrence and not likely to happen again.
The forbearance takes the amount you owe and does 1 of 2 things: One option is to spread the amount you owe out over a period of 6 months. The other option is to add the amount owed on to the back end of your mortgage and have it paid at the end of your mortgage term. This may be an option that you were unaware of.
Option # 5 Deed in Lieu of Foreclosure
The advantages for the homeowner are to avoid foreclosure and not go through the difficult process that it entails. It will release all or most of the liability from the homeowner and allow the bank to turn around and sell the property much sooner without the bank having to spend additional time and money going through the foreclosure process. This would be a good option to consider if you feel that there will be no benefit from you selling your home or doing a short sale.
Option # 6 Do Nothing – Just Let it Go
You can always let your home go into foreclosure and do nothing. Sometimes the situation seems so overwhelming and this may be a good option. We don’t recommend that you do this, and would suggest that you talk to someone so you can determine if any of the options above would make more sense. Please feel free to ask any questions you have in our real estate forum. We have agents that will provide you with answers to all of your real estate questions. You can also contact us if you feel more comfortable. It’s important that you talk to someone that you can trust, and not someone that is looking to take advantage of someone in a difficult situation. There are many real estate scams and you don’t want to become a victim because you didn’t seek a second opinion. You may have some options that you are unaware of.
Don’t Hand Your House to a Thief
Mortgage scams come in 31 flavors. Here are three top choices of con artists and how to avoid them.
More than 323,000 properties entered some state of foreclosure in the first quarter of 2006, a 72% increase over the same period a year ago, according to Realty Trac.
Scammers know that people in trouble make easy victims. They’re swooping in and offering to “help” borrowers — and ending up with their house. Victims sometimes spend years fighting to get their homes back and some never succeed.
Scam No. 1: the Bailout, AKA Equity Stripping
In theory, a person or company could help a homeowner keep his house via a process in which the homeowner sells the house very cheaply to them while the homeowner gets his finances in order. The new owner pays the mortgage, and the old homeowner pays to live in the home in the meantime, buying back the home (with interest) in a fixed amount of time. If the financial setbacks are temporary, everybody can win: The homeowner keeps the house and the company earns a profit for its role as rescuer.
But reconveyance, as it’s sometimes known, is ripe for abuse.
Suppose you’ve got a $400,000 home, with $100,000 of equity in it. A divorce and medical bills have you facing foreclosure. Suddenly, the phone rings with a bailout proposal.
So you sell your home, for $320,000 — not much more than what’s owed on the mortgage. Why sell for so little? Because it’s never intended to be a true sale; remember, you don’t think you’re selling the house permanently, but buying it back in a short period, right?
The new purchaser, meanwhile, takes out a $320,000 loan, wipes out any liens on your property and even gets you a little cash back; and you get a two-year lease with a purchase option at the end.
But soon you realize you’re in trouble. Why? Because scammers aren’t about to let you get your home back. Often, the lease terms desperate homeowners agree to turn out to be as onerous as their previous mortgage payments that helped get them into trouble. Con artists also manipulate victims when facing crucial deadlines.
Clients are often told that payments are going be to under $1,000 a month. But the criminals dragged out the process until the foreclosure was imminent and they were backed into a corner. When they got to the closing they often change the terms for rent, example would be to raise the rent to $1,450. This increase is likely to make them default on the rent.
The process to get to this point is often dragged out and leads to the home owner having very few options at this point because the bank is so close to foreclosure and taking back the home.
This likely leaves you with the only option of agreeing to the higher rent and once you default on this rent payment the new purchaser evicts you as soon as possible, sells your $400,000 house, pays off the $320,000 loan and pockets about $80,000 — all for a few months of work. Some people don’t even fight back because they don’t know they have options — such as calling a lawyer.
Don’t do any of the following:
- Don’t fall for promises like “We’ll save your credit”; “We’ll buy your house ‘as is'”; or “We’ll get you a new mortgage with low monthly payments.”
- Don’t sign away ownership of your property (sometimes called a “quit claim deed”) to anyone without the advice of lawyer you trust. “When people get behind on their loan payments, they get a bit desperate, but the answer is not putting someone else on your title,” says Oakland real-estate attorney James Hand.
- Beware of any home sale contract where you aren’t formally released from liability for your mortgage. Also, make sure you know what rights you’re giving up and that you agree to giving them up.
Scam No. 2: Phantom Help
This scheme is fairly simple: Let’s say you’re way behind on your home payments and facing foreclosure. An individual or group approaches and offers to help — then charges you thousands of dollars for various administrative duties like filing forms and phone calls, or else keeps simply promising a big rescue later. You can probably guess what’s really going on: The “helper” isn’t really doing anything at all to stop your foreclosure despite collecting thousands from you. By the time you figure out you’ve been hoodwinked, it’s often too late to stop the loss of your home.
How did the scammer know to target you, anyway? That’s easy: When a lender schedules the home for public auction, the matter becomes public record. In just more than half of the states, a lawsuit must be filed in order to spur a sale. Anyone can check the court documents to find the list of lawsuits. Soon a letter or phone call comes like something from a guardian angel — only it’s a vulture.
In the other states (including California and Massachusetts, for example), the process doesn’t go through the courts; foreclosure sales simply must be advertised publicly, as in the local newspaper. This latter process usually moves faster — and makes an already-stressed homeowner even more vulnerable to a scam.
Do’s and don’ts:
- Do call your mortgage company or lender if you’re in trouble. Ask for the loss mitigation department. If you take a proactive aproach you will have a better chance of working something out with your current lender and avoid possibly avoid foreclosure. Lenders do not want to take back your home through foreclosure.
- Don’t call for assistance from one of those ubiquitous signs on telephone poles that advertise help. Chances are, that’s not where help lies.
- Do proceed with caution, if a company or person:
– Describes itself as a “mortgage consultant,” “foreclosure service,” or something similar;
– Collects a fee before giving any services;
– Advertises to people whose homes are listed for foreclosure, including anyone who sends fliers or solicits door-to-door; and says you should make home mortgage payments directly to them or to their company instead of your mortgage lender.
- Don’t panic. Get full information on the foreclosure process in your state. Make sure you know ALL deadlines — for court, for document filings, etc. States usually have associations that can offer free advice.
Scam No. 3: The bait-and-switch
In this scam, which NCLC calls the “bait-and-switch,” con artists actually trick a homeowner into signing over the deed to a home — without his knowledge.
How could somebody fall for this?
You don’t have to be old or a non-English speaker to be stymied by the legalese. These schemers get their victims to sign incredibly complicated legal documents that resulted in their property being transferred to entities such as trusts. “Most attorneys can’t understand these trust agreements. And if a criminal can’t get the signature, forgery goes a long way in real estate these days.
Do’s and don’ts
- Don’t sign anything that has any blank spaces. Information could be added later that you didn’t agree to. (Yes, it happens.)
- Never sign a contract under pressure. Always know exactly what you’re signing. Take your time to review the paperwork thoroughly — ideally with a lawyer who only represents your interests.
- Never make a verbal agreement. Get all promises in writing and get full copies.
Cast a jaundiced eye at deals that sound too good to be true. Lately, some scam artists promise they’ll wipe out or pay off your home’s debt for you (so-called “debt elimination”). Some flustered homeowners bite. Just remember the free lunch rule: There isn’t one.
A final thought: Remember, if you can’t fix your finances, selling your house (on the normal market that is) may not be the end of the world. Sure, you’ll be a renter again. But given how much homes around the country have appreciated in the last several years, chances are you’ve made some money, which you can use to get back on your feet.
Update September 6th 2008: If you are considering a short sale please read our short sale options section to find out if you would qualify for a real estate short sale.
If you want to stay in your home and feel that you could continue making your mortgage payments if you were able to modify your loan payment please make sure you contact your current lender. They are taking a much more pro-active approach and really trying to work with homeowners to do loan modifications and avoid foreclosures.