Experts agree there’s no chance of a large-scale foreclosure
crisis like we saw back in 2008, and that’s good news for the housing market.
As Mark Fleming, Chief Economist at First American, says:
“. . . don’t expect a housing bust like the mid-2000s, as
lending standards in this housing cycle have been much tighter and homeowners
have historically high levels of home equity, so there likely won’t be a surge
Data from the Mortgage Bankers Association (MBA) helps tell
this story. It shows the overall percentage of homeowners at risk is decreasing
significantly with time (see graph below):
But even though the volume of homeowners at risk is very
low, there is still a small percentage of homeowners who may be coming face to
face with foreclosure as a possibility today. If you’re facing difficulties
yourself, it can help to understand your options. It starts with knowing what
foreclosure is. Investopedia defines it like this:
“Typically, default is triggered when a borrower misses a
specific number of monthly payments . . . Foreclosure is the legal process by
which a lender attempts to recover the amount owed on a defaulted loan by
taking ownership of and selling the mortgaged property.”
The good news is there are alternatives available to help
you avoid going through the foreclosure process, including:
Deed-in-lieu of foreclosure
But before you go down any of those paths, it’s worth seeing
if you have enough equity in your home to sell it and protect your investment.
You May Be Able To Use Your Equity To Sell Your House
Equity is the difference between what you owe on the home
and its market value based on factors like price appreciation.
In today’s real estate market, many homeowners have far more
equity in their homes than they realize due to the home price appreciation
we’ve seen over the past few years. According to CoreLogic:
“The total average equity per borrower has now reached
almost $300,000, the highest in the data series.”
So, what does that mean for you?
If you’ve lived in your house for at least a few years or
more, chances are your home’s value, and your equity, has risen dramatically.
In addition, the mortgage payments you’ve made during that time chipped away at
the balance of your loan. If your home’s current value is higher than what you
still owe on your loan, you may be able to use that increase to your advantage.
Rick Sharga, Executive VP of Market Intelligence at ATTOM
Data, explains how equity can help:
“Very few of the properties entering the foreclosure
process have reverted to the lender at the end of the foreclosure. . . We
believe that this may be an indication that borrowers are leveraging their
equity and selling their homes rather than risking the loss of their equity in
a foreclosure auction.”
Lean on Experts To Explore Your Options
To find out how much equity you have, work with a local real
estate professional. They can give you an estimate of what your house could
sell for based on recent sales of similar homes in your area. You may be able
to sell your house to avoid foreclosure.
If you find out you have to pursue other options, your agent
can help with that too. They’ll be able to connect you with other professionals
in the industry, like housing counselors, who can look into your unique
situation and offer advice on next steps if selling isn’t your best alternative.
If you’re a homeowner facing hardship, let’s connect so you
have an expert on your side to explore your options and see if you can sell
your house to avoid foreclosure.