Millions of people are still underwater on their homes. The term “underwater” means that a homeowner owes more on his home than that home is actually worth.
This problem is an extremely serious one that has caused a drag on the real estate market, because it sometimes leads to people viewing their home as a bad investment that they want to walk away from. Anyone who is contemplating walking away from their home usually has many questions, such as:
Q: How many people are underwater on their homes?
A: Approximately twenty-one percent (21%) of homeowners in the Chicago area owe more on their home than it is worth. This is according to a recent report from Zillow, a company which monitors the real estate market.
Q: Is that an increase or a decrease?
A: It is a decrease, which is good for the real estate market. But according to that report, 21% of homeowners owe more on their home than it is worth. That is one out of every five homes. So, the housing market in Chicago is still suffering and has a long way to go towards recovery.
Q: What can I do to find out the value of my home?
A: One way is to get an appraisal. If you do so, you will most likely spend approximately $300 for a reputable and professionally done appraisal. You will get a written report stating that appraiser’s opinion as to the current value of your home. Keep in mind, if you do get an appraisal, then you will have to open your home for an inspection.
Q: If I am underwater, then what are my options?
A: It depends on what you want to do with the home. If you want to keep your home, but are not happy with your mortgage rates, then you have two options. If you want to leave your home, then you have other options.
Q: If I am underwater and I want to keep my home, what are my options?
A: One is to refinance and get in to a better loan with a better interest rate. However, refinancing is not as easy as it was a few years ago. The refinance market is still tight now. Plus, if you do refinance, then you will have to pay a fee to refinance, which most people can find excessive. The other option is to contact your lender and inquire about a loan modification. If you choose to go that route, then you probably need to discuss that with an attorney who is experienced in handling loan modifications, because there are many headaches to be wary of with a loan modification.
Q: Can you give me an example of such a headache?
A: If you are applying for a loan modification and you are current with your loan, then your bank will most likely not take your application seriously because a loan modification is geared towards homeowners who are struggling and who are in default. This means, the loan modification system is slanted towards giving attention to those homeowners who have missed mortgage payments. If you are current with your mortgage your application will probably not be given the attention it deserves.
Q: What are my options if I am underwater on my home and I want to leave the house?
A: First and foremost, you need to consult with an attorney who is experienced in handling those types of matters. Your case will be unique because there is only one home like yours. With that being said, your options generally entail: (1) returning the property to the bank outside of the court system; or (2) returning the property to the bank through the court system; or (3) leaving the property through a short sale. You absolutely must keep in mind that you are dealing with a very large asset and you should never attempt to handle anything related to your home by yourself. You must consult with an attorney who is experienced in handling these types of matters because if you do not, then you could end up in a worse position than you are in now, because each of these options have their own headaches and problems, which you should entrust to an experienced professional.