PART 1- FINANCIAL SET BACK
You just lost your job of 23 years. You still have kids at home and a mortgage. You are the primary wage earner of the household and with all the financial responsibilities of your 2 kids and a wife, you have very little savings. Does this sound familiar? Since you are 55 you may have difficulty finding another job quickly. Maybe you had thought about downsizing your home in the future since the kids are close to graduating high school but now it seems imminent to make a quick decision.
Sometimes Life shows up forcing us to make hard decisions. I learned through my own experiences, not to wait but to act quickly, find the right people to help me and make the needed decision that would work best for myself and my family even though it would be painful and hard to do.
In this 3 part series of how to handle financial set back with regards to real estate, we will present some scenarios and offer advice about what you can do. The 3 parts discussed are job loss caused by a forced retirement, age, illness, or lay offs as one category and then divorce and death of a spouse as category 3 and 4. Part 1 will address job loss. We will talk about how to manage expectations and tips on how you can best meet these challenges with regards to how to sell your home and/or other real estate holdings.
The fact is losing a job because of illness, lay offs and/or age can be devastating, especially if your savings is not enough to carry you through for at least a year or until you can find employment again. If age is a factor, there might not be another job to replace the one you held for many years. Technology has eliminated many jobs for older more highly paid workers and these jobs are being replaced by younger workers who will work for less money. If you still have a mortgage on your home, paying that mortgage as well as other monthly bills can be overwhelming or impossible. If you think staying in your home could be an option seek professional advice from your accountant or financial planner.
If selling of your property is imminent then seek the help of a qualified Real Estate agent. Here are some tips for making that very important choice.
- Getting a referral from a professional who uses Realtors in their practice is sound advice. It could also be a family associate but make sure they have experience with a distressed property situation.
- Look for an agent that has had experience dealing with short sales, disbursement of personal property, and has an team of people that can help you. I am talking about, estate sales people, painters, plumbers, handymen, attorneys for legal advice, lenders, etc.
- You also want a Realtor who has compassion for your situation and will work with you in a consultative fashion, give you the time and advice you will need even if it takes a while to prepare to sell the home or weed through other situations that will impact getting it on the market quickly.
- Ask lots of questions so you can make quick decisions if needed in order to avoid a short sale or foreclosure. Don’t bury your head in the sand. Take ACTION!
In dealing with these situations, I have found that some people can move quickly and feel good about their decisions while others drag their feet hoping the problem will solve itself or miraculously disappear if they just stop thinking about it. As we all know, problems of this magnitude do not just disappear, they must be dealt with as quickly as possible using sound advice.
Recently I was contacted by a lovely couple who needed to sell their home. Unbeknownst to me they had been advised by their financial planner to sell their home a year prior to our meeting. Mr. Seller had been out of a job for over a year but was hopeful to regain employment in the industry which he had worked for 30+ years. He was a man over 65 and companies were just not hiring for his particular skill set. Unfortunately in dragging their feet to sell their home their savings were running low and so by the time we got together it was “we need a quick sale”. We sold their home fairly quickly for a good price which afforded them an opportunity to put down a good chunk of money allowing them to substantially reduce the next mortgage making the new payment very affordable. After finding their perfect home again, we contacted the lender to procure the loan and much to our dismay we discovered they were 30 days late on their current mortgage and had asked for a forbearance. Forbearance granted by your bank means you may be able to stop making payments or reduce your monthly payment for up to 12 months. Interest does continue to accrue on your loan and is tacked on to the original loan making you owe more when you close out that mortgage. It can also be reported as late pays to the credit institutions which it did in this case. For some homeowners, forbearance in and of itself could be an option to stay in the home longer if you knew that your shortage of income was temporary and a new source of income was on the horizon, but a bad option if you have to sell and are looking to buy again quickly.
To make a long story short because of their prior exceptional credit history and the large down payment, the lender was able to keep the loan “in house” and make the deal happen. The real moral here is that the Seller waited too long to make the decision to downsize and then did not seek advice from the Realtor or lender before deciding to ask the bank for the forbearance. If this had gone on for several months it would have caused them not to be able to get another mortgage for several years. Another factor to this situation was the necessity for a quick sale. The real estate market is very healthy right now and good homes are selling quickly and for a good money. But what if that had not been the case and market was slow? We would have had to continue to drop the price on a weekly basis until we finally got a buyer. Can you see how selling under pressure can substantially impact the sellers bottom line. I certainly understood the embarrassment they must have felt about not being able to make their house payment but know that you need to be able to rely on the professionals to advise you. They do want to help and all information is confidential.
Here are a list of questions you might find helpful to ask when looking for a Realtor to help you sell your home in a distressed situation?
- What is a realistic time frame to prepare my home to sell?
- How quickly will it sell and for what price?
- Will I still be able to capture full market value if buyers know we are in a hurry and need to sell quickly?
- Can you help me find other trades for preparing my home to sell and making repairs?
- What happens if we cannot sell my home quickly?
- What happens if I owe more on my home than I can sell it for?
- Will I be able to find a new home to buy for what I can now afford?
- Can you help me find a lender to buy another home?
These questions will and can be easily answered by a Realtor who knows what they are doing, has handled similar situations and cares about you. So Don’t be afraid to ask!
Up next how to handle the sale of properties in a divorce situation.
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