Options and Costs
"I'm Upside Down in My House, Now What?" - How to Handle Negative Equity
Many homeowners struggle with the decision to pursue a short sale. Figuring out how to handle a negative equity situation requires assumptions on future earnings and the direction of property values in your particular neighborhood. Much of the initial consultation time we spend with homeowners involves analysis of their current financial situation and the extent to which they are upside down in their property. Most homeowners who are in a severely negative equity situation with no obvious prospects for significant improvements in their earnings will find it financially destructive to try to stay in a house and to keep making payments that are beyond their means.
Use caution when discussing this situation with the lender. Many lenders will convince the homeowner to continue to make payments with a “renegotiated” or “modified” loan that the homeowner is not able to maintain. In some limited cases these loan modifications can be the best direction for a homeowner to pursue. But the majority of loan modifications do not address the underlying issue of owing more on an asset than what it is worth, and this often worsens the homeowner’s financial situation over the long haul. A good rule of thumb is the 28% rule. If the bank is recommending a modified payment plan that has you paying any more than 28% of your total monthly income toward your house payment, then get a second opinion.
"What Do Your Services Cost?" - We get paid by the bank when we get the home sold.
We are a full service real estate brokerage. If you decide that a short sale is your best option (and most people do), then we will list and market your home just as we do with other properties that we sell throughout Central Florida. Our fee is a standard 6% fee that is split equally between our brokerage and the brokerage that secures the buyer.
The brokerage fee is typically paid by the seller. In a short sale transaction, the brokerage fee is one of the seller side closing costs that will be paid by the lender as a part of their costs to get the property sold. This results in no out-of-pocket costs to the seller for brokerage services.