I Owe More than My Kansas City Home is Worth, What Happens Next? Part 1
All too often we're approached by a prospective Seller that faces a tough decision: They owe more than their home is worth, what happens next?
I am not an attorney and always believe in YOUR right to speak with one, so this is based on generally accepted knowledge in our industry, and does not constitute legal advise, yada yada....
The answer may appear simple enough; pay down your mortgage, and coupled with nominal annualized appreciation
, someday you could sell your home and break even....Or you could contact your lender and request a reduction in the principal balance of your loan, and maybe with the help of the invisible dancing rabbit that lives under your front stoop you could get lucky and the lender may reduce the principle balance
of your loan....
Hum, do pigs fly?
Uh, oh...He's gonna say it
...Yep, I am...SHORTSALE
In a typical shortsale, the Seller owes more than the home is worth...sometimes A LOT more...The process is designed to get the Seller out of the home, and turn the property from a liability into an asset for the lender....Simple huh? NOPE.
If you lent your brother a baseball bat, you'd want the entire bat returned, not 87% of the bat, with a chunk sawed off of the end,....Am I right? Same with your lender, the difference is you Private Mortgage Insurance policy, ( or PMI for short), reimbursed the lender up to 80% of the value of the mortgage....With lender reinsurance reimbursing much of the remaining balance...."Wait a minute", you ask..."If that's true, how are borrower's held acountable for the entire loss?" I smell what you're cookin....
Simple, no one, not even the lender who initiated your loan, knows the value of the property in 5 years, 10 years, etc....The lender only knows how much money they lent YOU. And THAT is the amount of responsibility, plus applicable and acceptable attorney's fees YOU are responsibile to return to the Lender in the event of a default.
Still with me? Stick around for PART 2 and we'll outline what clients expect of us....If this sounds like your situation, should we talk?
Blog post written by: Dowell Taggart Team of RE/MAX Best Associates.
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