Let’s say Jane is about to be a divorcee. Jane is in her early twenties, has a young child with the about-to-be ex, and doesn’t earn a lot of money. Jane is a student, but only makes $7 an hour. She can only work when the husband isn’t, because they cannot afford daycare or preschool.
Jane has no family or support system, no where she can stay temporarily until she’s on her feet. Jane is also very concerned about uprooting the young child and bringing said child into an unstable and unfamiliar situation. Jane and the ex-husband have tried selling the home so that they may use what very little equity there is to start new lives, but after six months without a single offer they decided to give up.
If Jane called the lending company and explained the above situation, would there be any possibilities for her?
It certainly wouldn’t hurt to call and discuss it, but I doubt that it would do any good. It would be different if Jane’s difficulties were purely temporary, with some hope on the horizon (like, say, a medical problem that’s put a temporary strain on her finances, but that will get resolved). In that case, the mortgage company might be willing to work out some sort of accommodation.
In the situation you describe, however, it sounds as if Jane will never be able to make the mortgage payments. She’s not on the brink of getting a new, better job, and her impending divorce certainly isn’t going to improve her cash flow.
Like them or not, mortgage companies are businesses, with shareholders. A mortgage company that gives up its right to collect the money it has lent out would be breaching its fiduciary duty to its shareholders. In this case, the only hope the mortgage company has of getting its money back is to take the house and sell it.
The government offers a loan program (FHA) which you may qualify for, but only if you make enough money to pay the mortgage. If you credit isn’t too bad and you can scrape together a minimum of 5% for the downpayment (plus closing fees etc) maybe that would be an option? The interest rates tend to be a bit higher but its much easier to come up with 5% down rather than 20% down. Also, when putting down less than 20% you will likely be required to pay insurance on the loan (PMI - personal mortgage insurance) which, in my case, runs around $80 a month on top of your mortgage payment. Its hard to get a house, I’m trying to now and it can be more than a little frustrating.
Just curious, why isn’t the house getting offers? Priced too high? Beat up? The housing market is nuts right now which is why I ask. Around here the homes have practically doubled in value over the last 5-10 years.
As a real estate agent I can assure there is a market price that most houses will sell at unless there is a glaring locational or physical defect(s) that makes the house a poor deal. For a house to be on the market for 6 months without a single offer it is usually indicative of an overpriced listing, poor preparation of the house and yard for maximum curb appeal, or a lazy agent, and possibly any combination thereof. If they overpaid for the house (for whatever reason) relative to the market, and are now “upside down” re value vs what is owed, they have to steel themselves to either take a haircut on the price, or hang on to the house if they/she can wangle some way to make the payment (possibly sub-letting a room or two to students) .
Re the pity angle… no. What some companies will do, however, is to renegotiate the interest rate and essentialy generate a new loan at a lower rate. I did this, at a zero transaction cost, and saved myself about $ 80 a month. Most companies will only do this if your credit is golden, and you could easily get another loan with a competing lender (and they know it).
The probable bottom line is that they need to quickly get realistic about the real world selling price of the house (or get a better agent) and move it. If the facts are as you have related she will not be able to maintain the house payments and repossession and a black mark on their credit is around the corner. Time is not their friend in this scenario.
It never fails to astonish me that some people in my area selling their homes don’t take the time to clean it up nice first. Plant some flowers, put some driveway trim down, and god forbid clean it up a little! Some prospective buyers impress easily and something as simple as a flower bed can make all the difference.
Been in our new house just over a month now. But wow, when we were looking, I tell you it seemed like a lot of people didn’t want to sell their houses!
We kept our previous house perfect. After relisting* we had a perfect offer in two weeks. I think the average here is two months.
And a hint, people – if you’re going to sell your house, don’t be there when prospective buyers come through.
*We’d listed last year (too high), and tried FSBY for a bit (no pre-screening), so the “two weeks” thing isn’t misleading, but in the interest of full disclosure I thought I’d mention it.
In my area (just outside Philadelphia PA) the housing market is completely insane. These are homes that just 5 years ago were worth barely $100000, many people got them 15-20 years ago for $50000. Now they are going for $180,000 and up, many selling within days of being listed. We found one gem for $161,000 that needed inside work, gone in a day. Developers buy them up, fix them, and then sell them at insane profits. Everybody wants to live in the suburbs but soon the suburbs are going to be like the city.