Loan Modification vs Short Sale - Which is Really Better?
The news continues about the Obama Help for Homeowners program, and the fact that only 850,000 homeowners nationwide have actually been helped by this plan, leads a lot of us of us in the industry to view the program as a failure.850,000 is a very small number - especially when you consider the latest statistics that say that 10% of homeowners in the US are at risk for default.
While the loan modifications may help homeowners with their monthly bills, are the really coming out ahead in the long run?
If payments are reduced/modified and the home has $200,000 of negative equity, chances are that negative equity will still be there at the end of the loan modification period.
It may be in the best interest of some homeowners (especially with the high default rate of loan modifications) to cut to the chase and short sell their home.
If there is a true hardship, chances are they will be able to rent a comparable home in the same neighborhood for less money and not have the negative equity hanging over them.
Will their FICO score take a hit? Absolutely. But the real question is - what will they recover from faster? A hit to their FICO score or hundreds of thousands of dollars in negative equity from which they may never recover?
Unless lenders write down principle balances, it may very well make more sense for a homeowner to short sell.
Thinking about short selling your home? Visit for answers to frequently asked questions - or shoot me an e-mail. I can also be reached at 925-824-4877 925-824-4877. I'm here to help.
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