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What we are facing in today's real estate market is unprecedented. It is beyond the control of anyone being affected. It is affected by external factors, such as increasing property taxes, insurance and the adjustable rate mortgages. Many say it appears similar to what we experienced during and after the depression. Well, first of all, I was not alive during and after the Great Depression, much less working in real estate. Therefore, I can't comments on those experiences. But what I can say is this. What we are facing right now and in the future is more than anyone could have imagined.

The implications are going to be felt worldwide and it will impact our economy. The people are going to get squeezed in a way they would have never imagined. Getting the right information right now and in the future is so important because making the right decisions today will have a far reaching impact on your ability to buy a home again in the future. For instance, if you had known with certainty that option arm mortgages are nothing more than very dangerous teaser rates and as dangerous as playing with fire in Southern California, I am sure you would not have gambled, signing on like the rest of the victims.

Here are the three things you must remember in foreclosures:

1. Speak to your lender
2. Speak to your lender

3. Speak to your lender

Try to renegotiate your interest rates. Ask them not to raise your adjustable rate, Ask for a payment holiday if possible. You must try to resolve the problem with them first. I know they are tough to deal with. I know they don't call you back. I know the phones are swamped. Do it.

Also, see if you qualify for an FHA workout program. Call Marc Urbainczyk with Sonoma Mortgage at 321-228-3104 (or email This e-mail address is being protected from spam bots, you need JavaScript enabled to view it ) to see if this may work for you. If everything else fails, work with us on a short sale by calling 407-330-2181. Or, contact us now by clicking here.

Had you been told with certainty that adjustable rate mortgages also adhere to the law of physics (what goes up must come down), you would have had second thoughts about signing on the dotted line. Regardless, we are facing an equally dangerous trend which is foreclosure of homes and we must figure out how best to handle them right now. Thousands of people are turning the key over to the mortgage companies, walking away from their mortgage obligations and letting the banks foreclose on their homes. This, however, is not the best way to handle this situation. The foreclosure will remain on your credit record for many years to come and it will be very difficult for you to ever get a home loan with a reasonable rate as a result of your improper handling of this situation. It is very easy to just turn your back and say, "let's forget about it".

I say you can soften the blow considerably by taking the short sale route. Even if you didn't know about the option arm mortgage danger, you had better know about the foreclosure danger. Yes, it is very easy to just walk away, but walking away is not going to solve your credit and foreclosure problem. Your credit report is going to reflect that foreclosure for many years and you will have a hard time explaining this irresponsible move to future mortgage lenders. When faced with the choice of "walking away" from your obligation vs. short selling your home, the right choice is a short sale.

Short selling may take some effort on your part, but it will show future lenders that you cared enough to make a Herculean effort in selling your previous home during difficult times and you will not turn your back on them. And while you were not able to get full price, at least you did not dump the home into the lenders lap. Both lenders and credit reporters will look favorably at this effort and award you with better credit scores in the future.

Tax issues with short sales and foreclosures

Yes. There is an issue with the short sale potentially creating a tax liability. However, if you are insolvent, you need to check with your CPA. You may not owe any taxes at all. Also, here is this information from the Florida bankruptcy blog:

Proposed Law Eliminates Tax Penalty from Foreclosure

One of biggest problems for people facing foreclosure of investment property in today's real estate recession is tax liability for the difference between the mortgage balance and the value of the property at the foreclosure sale or at time of a deed in lieu or short sale. The Wall Street Journal reports that there is a bill in the House of Representatives to eliminate income tax liability for debt forgiveness for homeowners. The bill passed Ways and Means Committee, and according to the paper the bill has bi-partisan political support. The law, if passed, would remove a significant tax penalty for people facing the loss of real estate during the current market downturn. -September 27, 2007

So, in the final analysis, there are buyers willing and able to buy your home at a certain price and it is our job to find these buyers and negotiate a settlement with your lender. This process will take several months and you have to provide financial information, a hardship letter, bank statements and so forth. However, instead of a foreclosure being recorded on your credit report, you may only have a few late payments and a charge off or a deficiency judgment on your record. Should the deficiency judgment become a burden at later times, you may want to speak to a bankruptcy attorney how to deal with this. It is our experience that after a bankruptcy has been discharged and you have kept the credit clean, you may be able to buy a home again after two years. When you have a foreclosure on your credit, it will take many more years to look favorably. The way the credit market is heading, this may be a problem for even more years. For further information on bankruptcy, we recommend bankruptcy attorney Kevin Mangum at www.mangum-law.com .

There are also a variety of credit repair options available online or otherwise. We suggest going to www.trinityenterprisesllc.com . We cannot vouch for these services, but they are certainly worth spending some time exploring them. Foreclosure should be avoided. There are alternatives that just require a little action on your part to prevent your credit from being destroyed. Build on your future with a call to us.

Here are the numbers:

U.S. Toll Free
1-800-779-6752

U.K. Toll Free
0-800-051-8891

Business Line
407-330-2181

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