If you live in metro Phoenix, chances are that your home might be "underwater" - you owe more on it than it's worth in the current real estate market. Is this a problem? That depends.
If you don't want to move for many more years in the future, it might not be a problem to be underwater. If you can afford the mortgage payment, it might not be a problem to be underwater. But, if you're struggling to make your mortgage payments and/or you absolutely *must* move, you might need to consider a short sale of your home. (see our series on when strategic default sometimes makes the most sense)
There are serious tax and credit consequences of foreclosure. Some lenders and credit experts estimate that foreclosure can knock 250 to 300 points off your credit score! In addition, some experts believe a short sale is less damaging to your credit than a foreclosure. For many metro-Phoenix area homeowners, a short sale can be a viable alternative to foreclosure.
Here are a couple of tips for successfully requesting and completing a short sale with your mortgage lender.
(1) Hire an experienced Realtor and then share your financial information fully with him/her. (see this prior article for a partial list of information homeowners must send their lender in a short sale situation). This might be tough advice to take, but your Realtor must know your complete financial picture in order to successfully advise you the best way to proceed in a short sale situation. Realtors are bound by a strict Ethics Code that requires they keep their clients' sensitive information absolutely secret from anyone not authorized to view the information. Don't feel you can trust your Realtor not to share your sensitive financial information with unauthorized people? Hire a different Realtor.
(2) Consider hiring an attorney. Arizona is an "anti-deficiency" state. This means that generally, lenders cannot sue homeowners for the money lost during after foreclosure. Example: your Realtor helped your short sell your home for $125,000 but you owed $225,000. In most cases in Arizona your lender cannot sue you later for the "lost" $100,000. BUT! There are loopholes in the Arizona anti-deficiency statute. We here at The Phoenix Agents highly recommend you consider hiring an attorney to help you determine if you fall into the Arizona foreclosure anti-deficiency loophole. An experienced attorney can probably help you avoid being sued later for the debt anyway. Do you need a referral to an attorney experienced in handling metro-Phoenix area short sales? Contact us, we know several.
Need more help? This blog is run by Chris & Heather, The Phoenix Agents @ Thompson’s Realty. We’re a boutique brokerage of 20 or 30 dedicated, full time professionals. We really do have a good track record at helping homeowners avoid foreclosure by completing a short sale. Give us a call, a text, an email or a Tweet. We’re here to help and look forward to speaking with you about your unique situation.
Image credit - Image ID 1235157 from Stock Exchange user meerlap