Are distressed homeowners making the right decision?

One of the most talked about subject you read or watch on television today is the housing crisis.  Homeowners walking away from their homes they can no longer afford.  Are distressed Lakeland homeowners making the right decision? As I was reading an article titled: “To walk or not to walk: underwater homeowners face dilemma”, I asked myself what I would do when faced with the decision of walking away.

The rise in foreclosure filings in Florida and around the country were first blamed on mortgage fraud and predatory lending practices. That is not the only case any longer.  Here in Florida, especially in Polk County, folks are faced with lay off’s resulting in double digit unemployment rates and now folks who still have a job, like my husband are faced with less than 40 hours work week reducing their income by 20% or more.

My parents never owned a home and when my husband and I purchased our Lakeland home in 1993, it was our American dream. When we signed the promissory note that states: “I promise to pay” we and most homeowners here in the United States have good intentions to keep this promise.  However, unexpected circumstances such as job loss, divorce, illness, reduced income, relocation, business failure or even death of a spouse can derail the promise once made.

I want to point out that I’m not an attorney and the tips outlined below are for informational purposes and not legal advice.  Please seek the advice from a qualified finance, tax, and legal professionals.

I am a real estate agent in Lakeland, Florida working with homeowners every day who are faced with this dilemma educating myself regularly by taking classes, talking with fellow real estate agents and researching available options.  I’m also a homeowner asking myself this very same question, “to walk or not to walk”.

Would I walk away?

Assuming there is a job loss or an enormous reduction in our income. I would not walk away from my home, at least not as a first step! I have to live somewhere. Making a budget should be the first thing a homeowner should do not only when faced with such a decision but on a regular basis.  People are stunned when they discover they can have an extra $100-$200 a month by eliminating going out to dinner, reducing their cable bill, installing a few energy efficient items to reduce their light bill, and reducing their cell phone bill.

Walking away from your Lakeland home will result in foreclosure. It will definitely hurt your credit rating by as much as 200-300 points and you will not be able to get another mortgage for number of years.

What would I do?

First of all, each homeowner has to make the decision by themselves and at their own best interest and while each homeowner’s situation is different here are the steps I would take:

I would not ignore the letters from my lender – I would call them immediately explaining my situation and take notes of the conversation.

I would try to work out an arrangement with my lender – For example, forbearance may be considered by the lender, if a new job is in sight, upcoming bonus or a tax refund.  Tell the lender about it and ask if you could make a partial payment, skip payments and tell them about your plan to catch up.

I would seek professional legal and financial advice – each homeowner’s situation is different and therefore I strongly recommend that you seek the counsel of an attorney and accountant experienced in foreclosure and bankruptcy.

If my lender would ignore, not communicate or decline my plea to a workout – I would try to sell my home as a Short Sale.  While the time of a Short Sale on your Lakeland home process can be long and stressful and not a 100% guarantee for the homeowner and their family, the buyer and their Realtors®, Lakeland Short Sales do get approved!

Despite all of the suggestion you hear from relatives or friends, read in the newspaper and online or watch on television; it is ultimately your decision and should be based on educating yourself, your options and discussion with family members.

Would you walk away?

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