Types of Sales Seen in Today's Market

This post is intended to help you understand the types of sales in today's marketplace. Whether you are a first time home buyer, or it is just one of many times you've purchased real estate, today's market is simply not the same as yesterday's. Read on to understand what you might find once you start your great house hunt.....

Traditional Sales If the prices are right, these are the best transactions! This is when "Joe the Plummer" is selling his home, and there is no third party involved on the seller side of the transaction. The contract is more “normal” in nature, allowing reasonable negotiations between the parties. Each party genuinely hopes for the sale to be completed and therefore works together to meet deadlines and ensure everything is resolved to the mutual satisfaction of all parties. Each party is likely only conducting one or two real estate transactions at a time, which are usually the largest financial considerations in that particular moment in time ~ therefore, each party gives this transaction his priority attention, and the process goes more smoothly as a result.

Considerations

• Generally, private homeowners can not compete with the aggressive pricing strategies of a bank/seller.
• Properties are often in better condition, requiring less fix up. Owners may also complete some repairs.
• Private owners generally do not consider a cash offer more valuable than common financing terms.

Short Sales In these sales, the Seller must negotiate with their lender(s) for approval before selling. They may be asking for full or partial debt forgiveness or a note payable for any deficit. Banks agreement to these sales are dependent on the ability of the family to repay the debt, and the circumstances that have changed since the loan was originally approved. This process can take several months, and sometimes does not result in a closing. Considerations:

• How many lenders are involved?
• What is the hardship/ability of the owners to repay?
• Will they be asking for debt forgiveness or a note payable?
• Who is negotiating with the bank and what is their experience level?
• Which bank is it; what is their process and has it been started?

Contract considerations:

• Longer contract periods with floating deadlines, all based on the approval timeline of the bank.
• Banks generally will not agree to a below market sale – this is determined based on an independent appraisal they conduct.
• While owners may consider doing some repairs, generally contracts are “AS IS”.
• Inspections are usually OK, but buyer can not ask for any repairs; their only choice is to terminate the contract.
• Cash offers are considered favorably, but not to the extent they are with bank owned properties.

Bank Owned (Post Foreclosure) Properties: These tend to be some of the best deals available in today’s market. Contract considerations:

• Banks are pricing aggressively, and when they do, often there are multiple competing offers for properties. You may consider submitting an escalation addendum in these cases, although some banks will not consider escalation addendums during negotiations and simply come back and ask for “best and final”, or accept an alternative offer.
• Cash is king! Banks realize the struggles and risks involved in some buyers obtaining financing. In addition, they are aware of property condition guidelines from FHA or other types of loans, which might REQUIRE repairs prior to closing… and they want to avoid this.
• By targeting homes which might not qualify for government financing, and making cash offers, you may be able to buy at a more reduced rate.
• If you are using a government loan to purchase, be prepared to have offers on REOs rejected.
• Often properties are in “fixer upper” condition, and properties are sold strictly AS IS.
• Inspections are usually OK, but buyer’s only recourse is contract termination.
• Banks require that you agree to the terms in their addenda, with NO CHANGES.
• Some banks require certified funds as deposit and/or specify who will hold the deposit.

Banks are like the military – it’s “hurry up and wait”. The timeline looks something like this:

Offer Submission

• 3-10 days later, Offer “Acceptance” (verbal or email)
• 1-2 days later, Counter Offer sent w/bank addendum
• Within 1 day – resubmit offer w/ acceptance of bank terms
• 3-10 days later, Ratified Contract.

Closing is as specified in the counter offer, which is generally a fixed date. Challenges here become getting utilities turned on to complete the home inspection; completing title searches; & obtaining HOA docs within the time frame permitted by the contract.

Banks will close AFTER you, and you will not get possession until they’ve signed off on everything. This can cause delays, I have seen more than 1 take over 2 weeks. I suggest attempting to negotiate a penalty to the banks should this occur.

Read more about Buying Post Foreclosures/REOs HERE.

Auctions: Public Auctions/Courthouse Steps: These are the foreclosure auctions. The vast majority of these are purchased by the bank who owns the mortgage/lien, which is generally more than the current market value. There are some opportunities here, but they are more limited than many expect. There are also more challenges in these transactions. Generally, no contingencies are allowed. Should your financing fall apart, you will be considered in default and not able to recover your deposit. Private Auctions/Ballrooms or at property: These are often done by banks (or other parties) and most commonly are done with a RESERVE. Again, there are sporadic opportunities here. Terms are very similar to those by any Bank Owned Homes. Be sure to understand the purchase agreement, as there may or may not be allowances for contingencies.

Read more about Real Estate Auctions HERE.

These are the primary types of sales we are seeing today... depending on your specific circumstances, you can decide which of these types of sales are ones that you would like to consider for purchase; and now you have at least some idea what you might encounter.

Auctions: Part 4 - Retail Auctions

The next in a series about Real Estate Auctions, this post discusses what I call "retail" auctions. These are the ones you see advertised in the late night infomercials, on signs, in magazines, etc. They're held in ballrooms, convention centers, or perhaps at a property. While they may be single property auctions, multiple property auctions are more common, and sometimes have only one owner - a bank, who hopes to dispose of multiple properties at a single event.

These are private auctioneers, hired by sellers (today this is mostly being used by banks to dispose of their post foreclosure holdings). These auctioneers are selected for their promises of grand marketing campaigns. Logic dictates that the more exposure you have, the better your chances of selling a property. Further, with auctions, you create something that has largely been missing from our marketplace, a sense of urgency. That urgency is created by the auction deadline.

These auctions work under the assumptions that the higher number of people in attendance, the better prices the properties will bring. They get consumer attention by giving the impression that banks are pricing them well below market and willing to sell at any price. The auctioneers and sellers hope that once you get the potential buyers in a crowded room they will compete against one another to increase the price. Buyers hope that price is well below market value. Sellers hope it will be well above. The auctioneers really just want it to sell (that part is a secret).

To get attention, the advertisements will say "opening bid $20,000" for a property that is clearly worth $200,000. Since we know the difference between an "opening bid" and a "minimum bid", we know that does not mean that the bank is willing to sell the property for $20,000. When you call the auctioneer, you'll likely be told (only if you're educated enough to ask) that the auction is a "reserve" auction. This frustrates consumers. But, I wish they understood that the auctioneer doesn't just facilitate the transaction, he represents the owner. The auctioneer has a contractual obligation to the owner to hold certain information in confidence, including the minimum selling price. It is in the best interest of the owner that the potential purchaser does not know the minimum selling price until he's made his best and final offer.

In any case, headlines like "Bank sale of foreclosed properties! Hundreds to be sold! Minimum Bid $20,000!" will bring out all sorts of buyers who think they smell blood. And, if you play your cards right, you could be one of them! (lol)

Although it is my goal to dispell myths here, I don't want people to think that the entire thing is a scam. It's not, it's a marketing tool. The sellers (in my examples, the banks) DO want to sell the properties. If they get the right price, they will. While the price is not $20,000... it may be lower than you think.

Before showing up at the auction, do your homework:

• Review the purchase agreement, get advice on it.
• You may need to have your financing lined up (and may be risking your deposit if your financing falls apart after the sale). Check that purchase agreement for financing contingency language. Some allow financing contingencies only if you're getting financing through their preferred lender, which often will be the seller.
• You are likely to have to do any home inspections and perhaps appraisals in advance of the auction. This information, too, is available by reviewing that purchase agreement. Find out (and attend) one or more open house/inspection opportunities.
• You will need to know what money you'll be required to present in order to bid (this is usually a set amount in the form of a cashier's check).
• I recommend getting a broker's price opinion AND an appraisal. Hopefully, the two are fairly close, and then you'll know what your maximum purchase price should be.
• Understand how, if at all, your real estate agent will be compensated by the auction company. They may not be compensated at all, and you may have to pay the agent out of your pocket at the settlement table. It's worth it, but talk to your lender and make sure it does not mess up the ratios required for the purchase.
• Ask if there is a "buyer's premium" and how much. Confirm that the sales price shown on the purchasing agreement will be the "gavel" price plus the buyer's premium, and make sure your lender is comfortable with how that will affect your loan.

Once you get to the auction, you'll be registered to bid, given a brochure and told approximately when the property will be auctioned. Other vendors are likely to be present, perhaps a mortgage company, maybe a title company, etc. who may be able to answer your questions and solicit their services. When your property is called, be ready. Things move quickly. You will have no time at all to think through what you wish to bid. If you are to remain competitive, you must continue to bid. If you need to think about it, you'll lose. Again, your agent can assist you with this process, help you keep your focus. Then, it's done.

The highest bidder wins, if they meet the minimum reserve set by the bank. Assuming there is one, the winner has more paperwork to do, and then you're done. That's it. By the time you realize whether you won or lost, they've auctioned off 2 more properties.

If the highest bid does not meet the minimum reserve required by the bank, but it's pretty close, the bank will often continue to negotiate with the purchaser after the auction...and sometimes, will reach an agreement. You see, the auction is a process, it is not a day.

If there is no satisfactory buyer that produces a bid the seller is willing to take, the property will likely be re-listed again with a "regular" listing agent and marketed through conventional means. This time, the bank's been able to reevaluate the pricing strategy they have, based on the bids received at auction. If the bank had previously priced the property at $210,000, and they had 2 registered bidders producing a high offer of $160,000; then the bank may have the property re-appraised, and may lower the asking price to $175,000; and here they usually pay your agent's fees for you, and allow reasonable financing, inspection and appraisal contingencies, with more time to think about each decision. It's a better process for the buyer, but still has it's own headaches. For more information on purchasing REOs, read my previous posts.

Auctions: Part 2 Types of Auctions

Continuing our series on Real Estate Auctions, this post focuses on the three types of Auctions:

Absolute:

Absolute auctions are what most consumers think of when they hear the term "Auction". It means that once the auction is opened and bidding starts, the property MUST be sold to the highest bidder, regardless of what that bid is. A million dollar property could, theoretically, be sold for $2. It's not likely... but it could happen. Generally, foreclosure auctions are absolute... but be sure to stay tuned for more information; it's not likely that you'll get your Million dollar property for $2, and we'll be explaining why in the next post.

Minimum Bid: With these auctions, the seller has agreed to sell only if the auctioneer can obtain at least a minimum price; and that price is disclosed to buyers. It may be included in the advertising or may be disclosed only upon direct questioning from the buyer or his agent. If the auctioneer cannot obtain that price, then the seller is under no obligation to sell.

Reserve Bid: Here the seller has set a minimum bid, but the auctioneer is NOT PERMITTED to tell anyone what that minimum bid is. We are currently seeing a lot of these types of auctions. After banks foreclose on properties, they will often put a portfolio of properties together and take them all to auction somewhere.

See the next post in our series: What happens at foreclosure auctions.

Auctions: Part 1 - Where is the auction being held?

The first thing any buyer should ask is "where is the auction being held?" We are seeing real estate auctions in many arenas:

• Courthouse Steps
• At the Property
• In Ballrooms, Convention Centers and other Large Meeting Spaces

Are they all the same? The answer is - NO. By understanding where the auction is, you'll understand the intention behind the auction itself.

Auctions done at the courthouse steps are generally ordered by a judge and/or a pre-arranged condition of a contract. In other words, judges charged with determining final disposition of marital estates for a divorce, personal estates following someone's death, or liquidation of someone's assets for collection or bankruptsy proceedings may order an auction on the courthouse steps. In addition, foreclosure auctions are done at the courthouse steps.

You map also see advertisements in the local newspapers, online, on billboards and in informercials for other auctions, held by privately hired auctioneers. These are very different.

Auctions done at the courthouse steps are advertised through public notices in the newspaper. They are "Absolute" auctions (see next post), and rain or shine, the property will be auctioned that day. The auctioneer is under no obligation to do anything special to attempt to get the highest price for the seller. The auctioneer has only the same public information that is available to you if you do your research.

Auctions done at the property and in ballrooms are done by private auctioneers, hired not just for their auctioneer license, but also for their marketing skills and advertising program. They are expected to advocate for the seller. If, on the day of the auction, there are not many registered buyers, or the auctioneer, for ANY reason, feels that the auction is not in the best interest of the seller, the auctioneer has not only the right, but the obligation, to postpone the sale.

In our next post, when we'll will explain the 3 types of auction.

Renters Beware!

Imagine this: You're at home, having a weekend cookout with friends. There's a knock at your door. It's a real estate agent. He explains your landlord lost the property when the bank foreclosed. He wants to know how quickly you can move. He offers you a hundred dollars if you can move by next weekend, if you can't, they'll start the eviction process immediately. What? Eviction? Wait! You've been paying your rent. You have a lease. The owner never said anything. What's going on? This scenario is happening with increasing frequency. Renters are shocked to learn that even if they pay their rent, landlords have no obligation to use that money to pay the mortgage payment. In most cases, the renters can forget trying to recover their security deposit. What can you do to protect yourself? First, consider renting from a professional, established owner/landlord. For example, apartment or other rental communities are usually a safe bet, plus they often offer other services and amenities not found with privately owned homes. If you can not find a rental community that fits your needs, I suggest you contact a real estate agent who can help you evaluate the risks associated with renting from private landlords. You run a lower risk of running into this situation if the property was recently purchased by the current owner or if the property has been an investment property for many years. If the owner had listed the property "for sale" or "for rent", beware! These are desperation moves by an owner. Owners in this situation have been unable to sell their home and are usually in financial distress. After you've moved in, keep your eyes peeled for other signs. If an owner fails to conduct maintenance on the property, if the landlord seems to be dodging your calls, or you see bank notices addressed to him, these could all be a sign of problems to come. In the "good ole' days" the landlords screened the tenants. Today, smart tenants are screening their landlords, too; and a professional tenant's agent can help you.

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Search for homes for rent or sale using the Home Search tool on my home page: http://www.vickychrisner.com/ and let me know how I can help you!

The Great House Hunt

UPDATE: Thanks for coming to my blog. Regardless of how you got here, this series was written in 2008. The market is ever evolving and hopefully you will find this information outdated. A better source of CURRENT information about buying an REO can be found by clicking HERE: REOs in 2010.


==============ORIGINAL POST===================

So, you’re ready to go see some properties. With the REOs flooding the market, the term House Hunt is starting to have a new meaning. Looking at some REOs can be an adventure – think “Wild African Safari”. Here are a few tips on what to expect when you get out there… none of this is fiction, it is based on actual experiences; and it includes mundane information that will bore you, but make you more prepared for the day of "the HUNT".  (Watch this video - it will give you a clue! This was prepared by a colleague at another brokerage, but is similar to stories heard around the country!)

Short Sales – In our area, you’ll find that these are often occupied homes, so you must call ahead before going to see the homes. Many times, they're in good shape and very presentable. Sometimes, however, the "depression" of the owners will be obvious.

REOs – Let’s call these what they are – abandoned properties. You never know what you will find.

- There may or may not be a sign out front. You'll likely be greeted by signs that say "WARNING" and then have a bunch of smaller writing...but they will not be warning you of the stuff that they SHOULD be warning you of! - These homes are generally (but not always) “trashed out” – meaning the owner’s stuff that was left behind has been removed. There MAY have been a surface cleaning done. (Tip - DO NOT OPEN THE REFRIGERATOR, even if the house looks clean.) - Previous owners, depressed and angry about their situation, may have deliberately vandalized the home – and sometimes you find some really gross stuff in there. - Locks have likely been changed and the property may be winterized and/or have no utilities in service. Try to plan your trip when there’s plenty of daylight. Sometimes the locks are broken. I had a door knob fall off in my hand once. Bring a screwdriver with you. And, while you’re at it, you might want to bring a flash light, too, and, oh, a pair of rubber gloves never hurt anyone. - Who knows the last time someone checked this property? Check the perimeter of the property, and enter carefully, some of these vacant homes are being occupied by the homeless, or prostitutes. And wild animals, or dead animals (or dead wild animals) are being found inside. - Consider your dress. You could have to walk through the yard to get to the home. The grass could be overgrown (think trash, pet waste, snakes or ticks) or you could enter a home that has a pest infestation. Wearing sandals or heels and a nice suit may not be a good choice.

I do not say any of this to scare you. Banks are taking more pride and doing more to ensure that the properties are presentable. However, I know I wish someone had warned me before I showed a few of these properties!

Traditional Sales – These may be vacant or occupied, so read the showing instructions carefully. They will generally be in presentable shape, they may even be professionally staged. Utilities are usually on, the home is comfortable, and visiting these homes can be pleasurable. Sometimes, they’ll even have nice brochures, smooth jazz playing in the background; there could be take away promo items or even refreshments! Gosh, you’d think these people want to sell! After your first trip out, you’ll be more educated. Look at the prices, consider what cleaning and maintenance costs might be involved. (I had one home inspector make a written recommendation to a buyer client of mine to have the toilet cleaned by a licensed professional.) Talk to your agent about the timelines and potential negotiation and transactional pitfalls to expect from the various types of sellers. Still thinking of focusing on REOs? It’s something to consider. But, make sure you get a good deal.

Now that you have a clue about the market, are you ready?  Well... come on!  Hop in and let's start looking!

My next post will be on preparing the offer for an REO. So, you can stay up and keep reading... or jump in the car with me, and we'll talk on the way to look at houses!

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Ready to Buy?

UPDATE: Thanks for coming to my blog. Regardless of how you got here, this series was written in 2008. The market is ever evolving and hopefully you will find this information outdated. A better source of CURRENT information about buying an REO can be found by clicking HERE: REOs in 2010. FINANCES How much cash do you have to purchase this property? Will you need financing? What will that financing look like? Interview a few lenders. Find someone that has competitive rates and a wide range of products, and find someone that explains things to you well, and most importantly WHO YOU TRUST. Then, examine your options. Consider both the cash for closing and the monthly payments. Don’t forget about taxes and insurance, and HOA fees. (Tips: If you already have a buyer's agent, ask for a referral to a couple of lenders. Other good sources include a bank or lender you already have an established relationship with; and/or a referral from someone you know.) FIND AN AGENT Now, interview a few buyers agents. Most buyers NEED one, but even those that don’t NEED one, will find a great amount of convenience and pleasure in having someone coordinate this process for you and advise you at every turn. Working with a true professional will bring you great value. Plus, if you make a bad decision, and you don’t have a buyer’s agent, who will you blame? (Tips - find good agents through referrals of friends and relatives; but then interview them. All agents are not alike.) LEARN ABOUT THE MARKET An agent can tell you what’s available that meets your criteria based on an automated search. From there, drive the neighborhoods, get a feel for the areas you like best. Have your agent set you up with an automated search so you’ll be notified of homes coming on the market that might fit your criteria. This online studying will be the start of your education about price fluxuations, neighborhoods, available inventory and the activity level in the areas you're considering. If you are an investor, consider the strength of the rental markets, too, and the property price vs. the rental rates. Your agent should be able to help with this. After you’ve selected a few potential neighborhoods, consider looking at a homes. Here, there may be some minor differences between looking at “short sales”, REOs, or traditional sellers. Choose what homes you’ll see based on your criteria and the price. Don’t specifically target REOs, Short Sales or Traditional sales just yet. I learned along time ago to consider what I hear but to make my decisions on my first hand knowledge. Your agent should share their experiences with you, and be able to prep you on what to expect - like the things I will tell you in my next post… So, before you run out to get that first hand knowledge, wait for tomorrow's post. You'll be glad you did.

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You’re an investor or a personal home buyer, and you are looking for a great deal. You’ve heard that “foreclosures” are the way to go, but after reading my last post, you now know that those “layman” are mostly talking about REOs. Anyway, where to start? Start where all buyers should start – outline your goals and get a plan together. Consider: WHAT DO YOU LIKE For a personal purchase, this is about where you'll live and the quality of your life. Consider what your household needs to be comfortable and happy. How much space, what kind of neighborhood, schools, communities amenities. How many bedrooms, bathrooms? What kind of finishes? How big of a yard? How will you get to and from work? For an investment property, who will be your renter? What will they like and need? How will the property be managed? Can you do it or will it be too far from your home? Are you OK with handling maintenance issues? HOW LONG YOU WILL OWN For a personal property, think about how you believe your family will evolve over the next several years. How’s your health? What about your parents – will they be moving in? Do you plan to have kids or do you have kids going off to college? Will you be getting married, divorced, or getting a dog? How’s your job stability? Are you likely to be transferred? If you lost your job could you find another close by? Really think about this. Based on the answers to these questions, how long do you think you’ll own the property? The average is 7 years, by the way. Some people move more often, some people only move once in their adult lives. What kind are you? Here’s a tip – if you won’t live there (or don’t want to own the property) for a MINIMUM of five years, then consider renting. For an investment property, it's part of the basics. Real estate is a solid investment as a long term hold. This not the market for a fix and flip or pure short term speculation – it’s entirely too risky, so skip it. Put your money somewhere safer. If you’re planning a long term hold, more power to you – this is a great time to buy.

Truths about REOs

Thank you for reading my blog. This post was written in 2008 and the real estate market is ever evolving. It is now 2010 and the real estate world is very different, especially in the Northern Virginia area. If you're considering purchasing a bank owned home now, please refer to the updated series found by clicking HERE.


========ORIGINAL POST==========

Despite the fact that most people, practitioners and consumers alike, are now familiar with the term REO, some myths still remain. Here, I’ll address a couple that I seem to be hearing every day.

But, first, for those that don’t know, REO stands for Real Estate Owned. This generally refers to properties which have been foreclosed upon and which are now owned by the bank. In today’s market, these properties are being marketed in large numbers, and consume about half of the available inventory in many areas. So, before you enter the buying game, there are a couple of myths you should better understand.

Myth: Foreclosures are always a great deal.
Here, people often are using the words "Foreclosures" and "REOs" interchangeably, although they are not technically the same thing. In any case, considering the "as is/where is, take-it-or-leave-it" nature of the transaction, REOs and foreclosures SHOULD be a great deal. But, never assume. In some market conditions, I've heard of practitioners referring to foreclosures as “fool’s gold” because only a fool would believe they were a great deal. The message here: always evaluate every purchase individually. With these transactions, make sure you're well educated on the market conditions, and that you carefully compare the value of these properties with other types of sales. Remember to calculate in the risks and frustrations with buying a bank owned property vs. other properties in more traditional sales. At the end of the day, you have to feel like it was worth it all.

Myth: These banks don’t want the properties, so they’ll give them away.
Well, banks do not want the properties. They really don’t know what to do with them. However, out of need, they are now systematizing the management, marketing and sales of these properties. Consumers often fail to consider, however, that most banks have shareholders and they have a fiduciary responsibility to sell the properties for FAIR MARKET VALUE. By law, they are not permitted to give them away, or even come close to that. They are required to go through a process to determine what fair market value is, and to make sure the sales price is in line with those determinations. Compared to the average seller, negotiations with a bank may be tougher.

Consider this: an individual seller is making emotional decisions and is driven by their personal circumstances. On any given day, they could decide they don't care what they get for the house, so long as they don't have to mow that lawn one more time! On the flip side, they could decide since they loved the home and raised three kids there, that no matter what the market is doing, they are not selling their home for a price that does not match their emotional attachment. The dynamics of every real estate transaction are far reaching. As a buyer, you must understand what's going on behind the listing in order to properly gauge the sellers' motivation level, so you know the best way to attempt a negotiation. With individual sellers, it's a little tough, because there are more variables. However, with banks, we're now seeing patterns of behavior which are setting industry standards. This is allowing experienced buyers' agents to better advise their clients.

This is the first of a series of posts relating to purchasing REOs. There is so much to know and understand that I couldn't possibly put it all into one post. But, if you are considering buying an REO, or if you're an agent finally relenting and jumping in with your buyers, these are posts you won't want to miss.

Stay tuned!

What A Seller Should Know About Short Sales

We live in a rapidly changing environment, and what was good advice just a few weeks ago is not true today. So, check with MANY professionals before you make the decision to attempt a short sale. Things that increase your chance of having a short sale approved: -You have one lender, not multiple lenders. -If you have more than one lender, other lenders will be getting some of the proceeds of the sale. (With a foreclosure they usually get nothing.) -You are not requesting full debt forgiveness, but instead are asking for an unsecured note to pay any deficit in what is owed to the bank(s). -You are current in your payments (if you’re behind already, its too late – they will foreclose faster than you can get the sale approved). -You move QUICKLY. -You provide the documentation they ask for, QUICKLY. -You have had a change in your circumstances that has led to this issue – forced relocation (like military), illness, job loss/change, disability, divorce, etc. -You can prove every claim you make “I can’t afford the payments much longer”, “I don’t have the resources to pay off the balance I’ll owe”. -You marketed the property properly and received one or more reasonable offers, all of which are arms length (not your brother). Other things you should consider: -If the lender forgives any portion of the debt, you could owe taxes on that amount. Learn about the Debt Forgiveness Act Here, and talk to a competent tax advisor who is “up” on this (this is a law recently enacted and there are very few people who’ve filed a return yet under this new law). -You will be forced to give the lender a gazillion papers (you will know that gazillion is a number once you see what they are asking for). -This will take A LONG time. -Consumers are being PROSECUTED for loan fraud, if you fudged the truth about your income when you got the loan, you should seek competent legal advice before contacting your bank. (Please note this is true even if the foreclosure happens). -Your credit will still be significantly tarnished, and you likely won’t be able to buy another home (ever) without 20% down, and you won’t be able to buy at all in the near future. (However, it will probably be better than a foreclosure.) As you can see, you’ll need to consult with a tax accountant, possibly an attorney and definitely a real estate agent before making the decision. It might seem too hard, but, if your house goes to foreclosure, you’re not off the hook. Banks are pooling these “bad debts” and selling them to companies who will come after you for the remaining balance, unless you’ve negotiated something with the bank that prevents that. And, consumers who participated in loan fraud are being prosecuted regardless of whether the home went to foreclosure or there was a short sale. Being proactive and negotiating with a bank upfront for a short sale is probably your best option, you might be able to limit your future exposure for collection efforts, tax ramifications or prosecution for loan fraud.

Bottom line - if there is a way you can continue to ride out the market, pay your mortgage payments and make good on your debt, the market WILL eventually come back, and THAT is your best option. The WORST thing you can do is take the "Ostrich" approach and stick your head in the sand. Call a professional who can walk you through this process and get you the resources you need.