Solution to Sedona Foreclosures

In this current state of affairs in the Sedona, there are plenty of homes on the market in August 2008 - and buyers are starting to come back.  It’s been fairly busy for the last week or so with buyer inquiries, showing properties and dealing with offers.  However, there are still plenty of homes out there that are priced well and the sellers need to sell.  I came across a situation yesterday that’s not totally unusual.  A Sedona homeowner bought a home in Spring of 2006 (the height of the market) and is now relocating and wants to sell.  They originally put 10% down on a 350k home… and now the market’s slipped and the same home is now worth approximately 299k.  The homeowners owe 320k on the home and would love to just walk away without any penalties.  I might have the solution.  After speaking with a few lenders… they’ve counseled them to phone their mortgage lender and tell them that they’d like to give them the deed back… Deed in Lieu of Forclosure it’s called.  Depending on the goodwill of the lender they will do one of two things:

1)Mark the debt as “Paid as Agreed”   This is the best case scenario where you give the lender back the home because property values have dipped lower than the current loan…. and you’re not dinged on your credit.

2)Mark the debt as “Settled Account” - This isn’t nearly as good, because there are repercussions on your credit score(s) of about 50 points.  For reference sakes… I’m told that a foreclosure on your record can ding your score up to 250 points. 

Either way… (if you’re in this same situation) when you’re dealing with the lenders you’ll want  to get anything they tell you in writing before you do do the “Deed in Lieu of Foreclosure”  So,if you’re speaking with someone and they promise that you’ll be “Paid as Agreed” you’ll want to have them FAX you a signed statement that agrees to that before you move forward.  As always… you should check with a real estate attorney and/or tax consultant before you finalize your plans for something like this.

I hope this helps someone….

August 1st, 2008