Hard Choices: Sell Your Home and Avoid Foreclosure
Tough times can force tough choices. One day, you can be riding high and thinking your family is financially secure. The next day, the rug can be pulled out from under you and your whole world changes. Tragically, this is the world that millions of Americans now find themselves facing. Up to as many as 40 million Americans are facing the possibility of being evicted or foreclosure. In the coming months, millions will be forced to make tough choices that they never thought were possible only a few months ago. Millions will have to decide if they should sell their home and avoid foreclosure. Our hearts go out to everyone who is in this situation. If you are one of the millions who are forced to make this decision, we want you to be informed.
Economic Uncertainty
The novel coronavirus has brought many businesses to a screeching halt this year. In 2020 we are seeing unemployment rates reach near record highs. When it comes to unemployment some states have been hit harder than others. As of July 2020, Massachusetts has the highest unemployment rate of any state. Massachusetts’ unemployment rate of 16.1% is an indicator of the hardships the state is facing.
Many Americans unemployed due to the coronavirus face uncertainty as to when or if their jobs will return. With social distancing measures in place the restaurant industry is just one of many hit particularly hard by the pandemic. That industry alone could lose up to $240 billion by the end of this year. An estimated 1 in 4 businesses are at risk of permanent closures. It is just one of many industries unlikely to make a full recovery in the near future. With this kind of employment uncertainty looming, many homeowners are struggling to make mortgage payments. For many, there is no better time to sell your home and avoid foreclosure.
The Basics of Foreclosure
Foreclosure is the legal process of a lender attempting to recover amounts owed to them on a defaulted loan. They do this by taking ownership of the property and selling it. This process is typically triggered when a borrower fails to make a specific number of monthly payments. It may also be triggered when a borrower fails to meet terms of their mortgage agreement. Additionally, the lender is likely to charge fees and penalties for your late payments. The declaration of default and foreclosure proceedings will likely have fees as well. These extra charges can amount to tens of thousands of dollars. They will be added to what is owed to them. When this happens, the lender may sell your home at auction or through a realtor for whatever price they choose.
Once your home sells, the lender will keep what is owed to them. The rest is considered equity and the equity is yours. However, the lenders’ goal is to get what is owed to them. They are not looking to get the highest price possible. They just want their money quickly, so it is common for foreclosure homes to sell below value. The price adjustment from market value costs you equity, not them.
Along with suffering significant losses in equity, a foreclosure will damage your credit. A foreclosure will appear on your credit report within one to two months. It remains there for seven years after the date of your first missed mortgage payment. A foreclosure on your credit report makes buying a home in the future more difficult. In order to purchase another home after a foreclosure you will have to rebuild your credit. Furthermore, lenders enforce wait times between foreclosure and new home purchases. Fannie Mae or Freddie Mac loans require seven years between foreclosure and new home loans. The costs of foreclosure go beyond losing your home. Since this is the case, it might be preferable to sell your home and avoid foreclosure.
Silver Linings - Sell Your Home and Avoid Foreclosure
Nationally, the number of homes on the housing market in 2020 has decreased by 11.8% since last year. The Providence-Warwick, RI-MA metro has seen one of the largest declines in housing inventory with a decrease of 51.7%. Additionally, the average price homes sell for has increased by more that 10% and the number of days they are on the market has decreased. The typical home is selling faster than it did last year.
Record low interest rates have created an appeal for buyers to enter the housing market despite rising home prices. Buyer demand continues to increase as inventory remains low. This has created a market perfect for those looking to sell their home. Should you decide to sell your home it is likely to sell quickly and at a higher price. Getting a higher price for your home means a larger gap between what is owed and the selling price. This is equity and the equity is yours.
Bottom Line
A foreclosure can be devastating. It will negatively affect your credit in a way that is difficult to recover from. Selling your home can protect you from facing that hardship. High housing market prices and demand mean you can get the most equity out of your sale and quickly. This is money that can potentially help you survive the unemployment crisis and avoid damaging your credit score.
Even though it is the perfect time to sell your home, we recognize that this might not be what you wanted. Owning your dream home is the bedrock of the American dream. It is no less than a tragedy that economic uncertainty is forcing millions to choose between selling and foreclosure. If you are in this situation, Our team is here to help you sell your home and avoid foreclosure. Get the most of your current home today, so that you can be in a new home tomorrow.