Hold, short sell or foreclose?

Oh my, we are in a pickle here in Arizona.  Our real estate bubble burst with a bang and left many homeowners under water and holding real estate — and debt — without equity.  We’re not alone in that dilemma, but we are one of the hardest hit areas of the country and are regularly featured in national news stories about the mortgage lending and foreclosure crisis.

If you are living in an upside down house, love it beyond reason, and intend to stay there the rest of your life, then it’s probably a good idea to hang onto it.  However, if you’re in the midst of a divorce or break up and one salary won’t cover the carrying costs, you are probably having a very different conversation.  And that conversation can be making you anxious, stressed, depressed, sad, angry, resentful, or all of the above! 

While there are many opinions and theories about what you “should” do or “should not” do regarding underwater real estate, in the final analysis, it is a very personal financial decision.  It is not (or should not be) an emotional decision.  Houses are investments, in the form of real property, that you and/or your marital community made.  The investment is neither good nor bad.  The return on investment, however, has made millionaires of some and bankrupted many thousands more.

Clients ask me all the time, “Should we sell, hold, short sell, or foreclose?”  While I don’t pretend to have all the answers to every issue that one simple question implies, I do have two answers. 

One, please call on a professional to assist you in evaluating the issue.  I recommend either Tim Mackey, Mackey Law Firm, or Mick Bernard of Credit Strategies.  Tim can assist you in evaluating your specific case to determine whether you should be holding steady, foreclosing, considering a short sale or even bankruptcy.  Mick can assist you with credit repair and mortgage modification.

Two, consider how much financial damage the debt on your house is causing.  For many people, the stress of carrying too much debt is the straw that breaks the back of their marriage.  Removing that stress may not result in a reconciliation, but it may pave the way for a more relaxed settlement of divorce terms and (if you have kids) a much less stressful co-parenting relationship.  I recently met with a client who was very distraught over the fact that he was paying over $4,500 per month in mortgage payments, yet was not able to meet his small business payroll or pay for his youngest child’s daycare.  Clearly, something has to give!  Another client was amazed at how gracious her mortgage lender was when she applied for a loan modification — even in the midst of a divorce.  Within a few weeks, her loan was modified, in her sole name, and the payments were reduced by almost half.

Your situation is unique, which is why it is important to seek expert advice; however, when you are in the midst of a divorce, hard financial decisions must be made and — always — best interests of your children, spouse, and business should be paramount.

Choose Peace ~ It’s a Good Investment!