I was looking at the properties on Foreclosure Radar that are in default, checking on some properties that have been recently listed as short sales. I recognized an address I had visited several years ago to discuss selling it. At that time, the owner could have sold it easily and made a bit of money, but it wasn’t enough for her to do what she thought she wanted. We have talked about once every couple of years since then, but the last time I spoke with her, I had to tell her she wouldn’t make enough to pay off what she owes. Today, I saw that the property is in preforeclosure, scheduled for a possible sale at the end of the year. She may be able to drag the process out for several more months, maybe even years, but it doesn’t look like she’s going to be able to sell it “when the market recovers,” because she will owe too much in back payments, penalties and interest.
Once you fall behind, it can be very difficult to catch up. I can tell you several sad stories from the past few years. Each time, the owner could have sold it for enough to pay off the loans with a little bit left over to move and rent a place. But they “had” to have more. They “had” to be able to buy another house, or pay off all their debts, or something. But things didn’t go as planned, they slipped further and further behind, and lost it all—with the added bonus of having trashed their credit and made their lives even more difficult.
It is hard to face the reality of a bad financial situation. And the minute you fall behind in your payments, every scheme suddenly seems realistic. It’s a trick your mind can play on you, and it is made worse by every grifter who sees a chance to make some money off of your troubles. It is difficult to know who to trust. Since the notice of default is a public record, unsavory characters have an easy time finding people in trouble. Here is the advice you should heed: don’t ever pay anyone a fee upfront before they deliver on their promise of a loan modification or a short sale. It’s actually against the law for someone to accept such a fee.
But I also have some success stories to tell you. I helped several homeowners sell and move on before they fell behind in their payments, and a couple whom we managed to help right before the auction gavel came down. They didn’t get as much as they wanted to get. Some of them barely managed to pay off all their loans. But they are done and moved on. They may have regrets over what might have been or what they should have done earlier, but they don’t have that big “foreclosed” sign stamped in their memory to seal in the misery. And certainly, if they fell behind in their payments their credit suffered, but not nearly like it would have if they had lost their house in foreclosure.
If you find yourself in a situation where you need to change your real estate position, don’t let your emotions get in the way of what you know in your brain you need to do.