If you own a home in San Diego, California and are having a bit of trouble meeting your payments for mortgages, a perfect solution for you might be a short sale. Doing it this way, you can avoid having your home foreclosed and consider other home ownership options for the future with ownership carrying costs that fall within your current financial situation.
There are currently 629 properties in a stage of foreclosure in San Diego. Even though foreclosure seems to be growing in numbers, home prices and home sales are also normalizing in 2018 in San Diego. Because of this, short selling homes in San Diego has become one of the techniques and ways borrowers have used to avoid having their homes foreclosed.
San Diego Short Sale
A short sale is when your lender agrees on a selling price that is less than mortgage debt balance. The homeowner or seller is short on the cash that’s required to pay for the mortgage loan fully. In this transaction, the lender or bank will agree to accept sale proceeds to recoup a portion and release the property to you. Proceeds of the sale will be used to pay for a part of the mortgage debt balance.
Although short sales have become rare in a good economy, they have been found happening much more frequently in San Diego after the 2008 global financial crisis. Because the selling price of the house will be short of the entire debt amount, the difference between the selling price and total debt will be your deficiency. Typically, a bank can file a deficiency judgment against you to recover the deficient amount.
The bank may collect the balance by taking your wages or transferring it out of your bank account. Companies like San Diego short sale realtors will not be collecting if you are disciplined enough to set aside funds and pay.
Here are some tips on how to avoid this deficiency:
1. Make timely payments
Before you decide to take out a mortgage loan, you must have analyzed your finances already. In case you have not, the first thing that you have to do to avoid short sale is to make sure to have your finances in check so you can afford to pay your mortgage. You must make continuous and timely payments to your mortgage to avoid having to short sell your property. Some tips to develop a habit of making timely payments are the following:
- Control your expenses and budget in your mortgage payments
- Set a reminder for yourself to make the payment so you won’t forget about it
- Do not overspend by calculating a budget for each category of expenditures
- Avoid more debt by not using your credit card and going on cash basis
- Minimize flights and trips you take during the year
- Do not spend on unnecessary things like luxury bags, expensive cars, or expensive food
2. Sell your home
Another alternative to avoid short selling in San Diego is to sell the home using owner financing. With owner financing, the buyer will be the one to continue payments of the loan balance. You may sell your home and strike a deal with a buyer to meet the rest of the mortgage payments for you. Here is the process:
- In this transaction, the new buyer will pay you the amount you previously paid the bank for the mortgage.
- Consequently, they will also continue to pay the balance of your mortgage with the bank.
- In the end, you will regain the cash you spent in past amortization payments and avoid foreclosure by making sure that the new buyer will continue the remaining mortgage payments.
- If ever you decide to do this, you might also need to consult your lawyer and get some legal advice to iron out the agreements.
This is a good alternative and an excellent solution to avoid deficiency because of the following:
- You do not have to short sell your home and risk gaining deficiency that will eat up your income or savings
- You get cash from selling your home that will enable you to buy a new home of a lesser value
- You get your home for the value it’s worth rather than selling it at less
3. Consider loan modification
Some banks allow homeowners to modify the terms and conditions of the loan just to avoid foreclosure or selling your home. Here’s how:
- Typically, the bank can provide lower amortization amounts, longer tenors, and lower interest rates just so the borrower is able to meet payments.
- If you only ask, the bank can help you out to avoid foreclosure since foreclosures are also bad for the bank’s books.
- If your bank does not do it, you can try going through a loan modification company to talk about a possible loan modification option. The program will also do the same and reduce the amortization amount per month.
Loan modification is a good option and alternative to avoid deficiency because it allows you to make timely payments on a sculpted basis based on the amount you are able to pay. Having a loan sculpted based on your income and ability to pay will help you a lot in budgeting and affording your monthly amortization payments. By doing this, you will no longer have to short sell your home, and you will also be able to meet monthly payments.
There are many alternatives to help you avoid contending with short sales that are as simple as making timely payments to considering loan modification options. These simple tips provide a quick guide on how to avoid short selling deficiencies.