Behind on your mortgage? You have options!

Austin’s foreclosure rate is much lower than the national average, and really dramatically lower than the hardest-hit cities in the country.  Nonetheless, one related trend is as true here as elsewhere:  When homeowners have problems making mortgage payments, most just hunker down and wait for the hammer to fall.  If you’re in financial straits, please don’t be one of those.

Nationally, about 1 out of every 600 homes — 0.16% — received a notice of sale (foreclosure) last month.  The Texas average was about 0.11% — one of every 920 homes.  The rate in Travis County was 0.12%, or one of every 859 homes.  Compare that to Las Vegas, NV, where one of every 112 (0.89%) homes received a foreclosure notice last month.  That’s almost 7 1/2 times the foreclosure rate in Travis County!  To be fair, Hays, Williamson, and Bastrop counties are doing worse than Travis — 0.24%, 0.22%, and 0.18%, respectively.  But the highest foreclosure rate in the Austin Metro area is 73% lower than in Las Vegas!  Nationwide, foreclosed properties represented 31% of all home sales in the 2nd quarter of 2011.  In the Austin Metro area, it was less than half of that — about 15%.

But the point here isn’t just to report on the recent foreclosure market, but to encourage homeowners who need help to try to help themselves.  Indeed, the fact that we have fewer foreclosures here may make it harder for troubled homeowners to admit that they need help.

In a quick review of all the properties for which I have provided Broker Price Opinions over the past year, and the foreclosed properties that I have put on the market, I found that only 12/5% — 1 of 8 — were listed for sale during the previous 12 months.  That means that 7 out of every 8 homeowners in this market sample never listed their homes for sale before they were taken in foreclosure!

If you’re struggling with your house payment, or you have already missed a few payments, don’t be one of those 7-of-8 folks!  If you get in trouble financially:

1. Communicate with your mortgage lender or mortgage servicer (whoever you send your payments to);
2. Explain what has changed in your life that makes it hard to keep up with your mortgage — job loss, medical issues, family growth, etc. — a real hardship, not just “my house has lost value and I don’t think I want to pay for it anymore”;
3. Explore a forebearance agreement, which will allow you some time with no payments or with reduced payments while you get past the problems that caused you to default on your mortgage;
4. Try to work out a payment plan to get caught up;
5. Ask for a mortgage modification;
6. Hire a real estate professional to represent you in a short sale.  (Short sales must be listed in the local MLS.);
7. Propose to sign a deed in lieu of foreclosure.  (Deed the home back to the mortgage lender with minimal damage to your credit.)

There are many alternatives.  There are no guarantees.  But when you’re dealing with your family’s home, and your largest financial asset, it’s important enough to try!

The most important of those steps is to COMMUNICATE with your lender!  If you stop making payments and refuse to talk to your lender, you will definitely be on your way to foreclosure.  Instead, pick up the phone.  Call your lender’s customer service line.  Ask about your alternatives.  Ask who else you can talk to.  Keep notes and write letters!  Document the reasons for your financial hardship.  Document your efforts to work things out.  Don’t delay!  Take action as soon as you realize you’re in trouble!

If you’re not sure what to do, call a professional!  Many of us who work with distressed property situations will be happy to talk with you and offer advice.  And if it turns out that a short sale is your best option, give it a try!  Find an agent or broker with the right experience, get the right consultation, sign a listing agreement, and see how the market responds!  You have nothing to lose, and you just might save your financial future!