Deciding Whether to Short Sell or Modify Your Mortgage
Let's face it, falling behind with mortgage payments - or with any of your finances for that matter - can be one of the most stressful life events someone faces. In that moment of crisis, it's easy to overlook the options available to you or become frozen with indecision. People often ask me if it's worth fighting to keep their home or if they should just short sell, meaning they try to sell it at close to market value and convince the bank to accept less money than they are owed.
Inevitably, my first questions in response are, "How much does this home mean to you?" and "Do you have or have you thought about other living arrangements?" The decision to sell or fight to retain ownership is a complicated and very personal one involving many factors which must be carefully weighed. My duty is to assess the options available and advise as to the likelihood of success for each option, but ultimately the client must choose what they are most comfortable with. For some, attempting to save their house is the only option, no matter how underwater it is - or how far behind they are on their mortgage - particularly if the home has been passed down in their family. For others it's much more of a business decision. What will I end up paying on a modified and restructured mortgage? Can I live with that payment and is it comparable to what I would rent a similar property for?
Most importantly, homeowners should understand falling behind with their mortgage need not automatically lead to foreclosure. There are programs and people available to assist, and it is always better to start seeking help at the first signs of trouble. If you foresee financial trouble, contact our office so that we can work with your lender on a temporary modification or forbearance plan as soon as possible.
If you are already behind on your mortgage, the battle is more difficult but still far from over. Do not wait until the lender is calling you and begins the foreclosure process. Try to be proactive and allow us to work towards a resolution.
Lenders will not help you unless you can afford to be helped. That means that if a lender has predetermined repayment plans and the longest plan adds more to the mortgage payment than you can afford, then the repayment plan will not be offered to you. Lenders also believe they are helping you, so if they offer a repayment plan and you fail to make the payments, often they will not offer you a new repayment plan or modification without extenuating circumstances.
For a lot of people struggling with this question, the best approach really is wait and see. Wait to see what the terms of a modification look like and see if you can afford that payment long-term. Our office can provide guidance in making that decision by reviewing your finances discussing your long-term goals with you. Know that you are never obligated to accept the terms a lender offers for a loan modification, and you will generally have the opportunity to short sell the property if you cannot achieve a modification that makes sense for you.
-Andy Martignetti, Esq.
Information in the above article is for educational purposes only and does not create an attorney-client relationship. You should not construe this to be a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel.
