I’ve lost my job. Now what?

by on February 4, 2009

wall-street-job-lossWhen job loss occurs, the effect on families can be absolutely traumatic. I feel I’m taking a risk by discussing this so openly because its such a sensitive, personal topic to so many people but I don’t think I could live with myself unless I get this information out there to people who may need it.

If  job loss has affected your  family, its  important that you examine the answers to these questions:

1. Check your monthly expenses against how much money you have in savings.

2. How many months can you live in your house at these current monthly expenses?

3. What is the likelihood of finding the same paying  job? And to take that a step further, how long could it realistically take to find another job?

4. Have you called your mortgage company to see if loan modification is an option?  But is this the best long term solution for you?

budget1Let’s say that you bought your house 2 years ago for $1,000,000.   You got a mortgage of $800,000.  The market for your house bears about $850,000 now, and you have about  6 months left of monthly expenses without going into your retirement funds.  If you wait 2-3 months to put your home on the market, then your risk is that you could be putting yourself in a distress situation if the market comes down further or you can’t sell your house or both.  At that point, without employment it will be hard to find a rental if you can’t show proof of funds for the term of the lease.  This is another reason waiting is not a good idea.

I can’t stress enough how important it is to seek advice right away from a GOOD realtor or attorney you trust to advise you properly before you find yourself in this position.  The biggest eye opener to me is how quickly things can change and most people don’t realize this.

If you  can no longer  make your mortgage payments, get your house on the market right away and submit your financial hardship package  to your bank. Your realtor or attorney may be able to help you with this. The LAST thing you want to do is let your house go into foreclosure.  You can avoid this by selling during  the “short sale” or “pre-foreclosure” period!

There is a HUGE difference between foreclosures and short sales. I’m working on my CDPE ( certified distressed property expert) designation and learned the following from this eye opening course:

  • A homeowner who loses a home to a foreclosure is ineligible for a FNMA mortgage for a period of 5 years.  A homeowner who instead successfully negotiates and closes a short sale is eligible after only 2 years.
  • If you have a foreclosure on your record, on  future mortgage loan applications, you will have to answer YES to the question that asks “Have you had a property foreclosed upon in the last 7 years? This will affect your interest rates.  However, there is no similar declaration or question regarding a short sale.
  • Foreclosures will remain as public records on a person’s credit history for 10 years or more.  This can affect future employment because many employers require credit checks on job applicants. Short sales are not reported on a credit history so this is not an issue.
  • If you foreclose, your credit score will be lowered about 250 to 300 points for about 3 years. If you have a short sale, only late payments on mortgage will show and after sale mortgage will be reported as paid or negotiated. Your score will lower about 50 points, but this will only be for 12 to 18 months.
  • The bank has the right to pursue a deficiency judgement for both foreclosures and short sales. However, for successful short sales, because the home is sold at a price that should be close to market value, the deficiency will be much lower than an REO sale.

The positive news is that our NJ midtown direct towns are still in demand, and I’m still selling homes the first weekend for very close to asking price, as long as they are priced right. With the interest rates as low as they are, buyers who have been waiting to jump into the market are out there now, and although price conscious, they’re jumping on the homes they feel are nice and view as a great value.  So do not despair.  This is positive news for those who need to get  top dollar and fast.

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