Chicago’s Joe Aldeguer reports that these days, more Americans are facing their own personal financial crises and maybe facing foreclosure, or even bankruptcy. The real estate and finance expert recently sat down with CommunityBlogOnline.com staff to discuss what sort of long and short-term housing options are available for this ever-increasing group of Americans.
CommunityBlog: Thank you, Joe Aldeguer for speak with us this evening.
Joe Aldeguer: I appreciate the opportunity.
CommunityBlog: Can you tell us why bankruptcy and foreclosure are such hot topics these days?
Joe Aldeguer: The housing market crash of 2008 has taken its toll on many people’s finances. A great deal of Americans bought their homes at the height of the housing boom and are finding that they overpaid – sometimes, by hundreds of thousands of dollars – and are now underwater on their mortgage.
CommunityBlog: How is it possible to overpay for a home?
Joe Aldeguer: Real estate is like any other market; when demand is high, prices skyrocket and when it’s low, they plummet.
CommunityBlog: So now there are a good number of people that owe considerably more than their house is worth. These are the people that are going into foreclosure because of loss of income. In the past, people were able to sell their homes, but because values have dropped so much, this has not become an option. What can they do about housing during this time?
Joe Aldeguer: One option is to actually stay in the home and short sell the house. This means that the bank has to agree to sell the home for less than what the mortgage is worth. You need to be careful because the deficit of what you owe, compared to what it is sold for is something you will be responsible for, and that may have tax implications. That is why it is imperative that you consult with an experienced short sale attorney and a short sale realtor.
The second option: deed in lieu; in other words, you give back your keys and forego the foreclosure process. A third option is to litigate your loan with a hired attorney and have him or her keep you in the house for as long as possible to try and work with the bank. In many cases, this is a no-win situation. But it does enable you to stay in your home much longer than normal. This gives you time to recover, get a new job or save up to purchase a new house.
Your fourth option is to see a bankruptcy attorney and have him or her file a Chapter 13, which is a financial workout of what you owe. The last and final choice is what more than 99% of people do: NOTHING. This is the most dangerous option, because in 41 states, the banks/investors have up to 20 years to collect a deficit of what the house sold for than what you owe. If you have a good bankruptcy attorney, you can avoid this situation altogether. But in many cases, banks will allow the homeowner to stay in the home, just to keep the property from devaluing even further.
CommunityBlog: How long can someone stay in their home?
Joe Aldeguer: Again, depending on your state, it can take six months to twelve months. But the bottom line is, usually banks will push for immediate possession/foreclosure.
CommunityBlog: Can people hire an attorney so that they can fight to stay in their home?
Joe Aldeguer: Yes, we highly recommend it. Or at least, we encourage you to explore the right with the attorney as a homeowner. You may be able to stay in your home longer if you hire an attorney to exercise your rights.
CommunityBlog: But if a person’s credit has taken a recent ding due to foreclosure or bankruptcy it could be really hard for him or her to rent a place, correct?
Joe Aldeguer: That can be a temporary setback. There are strategies; however, it’s matter of being creative.
CommunityBlog: Can you give us an example?
Joe Aldeguer: If you have an attorney litigate your property, because you do not have to move out and pay rent, you can save the cash that you would be spending. In many cases, homeowners are able to stay in their home 18-36 months and save money. No attorney can give any guarantees, but this is the typical time frame we have seen. You can use this savings as a down payment or a deposit where the landlord will forgive any bad credit. In some cases, you can actually buy a house and complete owner financing.
CommunityBlog: What other housing options are there?
Joe Aldeguer: Again, it will usually come down to a matter of a down payment. While a person going through bankruptcy or foreclosure may temporarily not have the credit standing to rent, if they can pay, say, six months in advance, the landlord may consider their unique circumstances.
CommunityBlog: We’ve heard you say that it’s possible to buy a home in as little as three years after foreclosure/bankruptcy. Is this true?
Joe Aldeguer: Absolutely, with certain conditions. First condition: you’ve met the three year credit eligible FHA loan. Second condition, you need to reestablish your credit. Third condition, you need job security, which is usually considered to be two years at a job. With a good down payment, many things are possible.
CommunityBlog: Well, Mr. Aldeguer, that is all the time we have for today. Do you have anything to add?
Joe Aldeguer: I would just like to say that, although it may be a hopeless feeling for many homeowners, bankruptcy and foreclosure should really be viewed as a legal opportunity to get a fresh start.
CommunityBlog: That certainly seems to be the case.
Joe Aldeguer: Absolutely, and that is one of the things that I have said over and over throughout the years.
Chicago-based Joe Aldeguer is known as a real estate expert, consumer advocate and investor. For the last two decades, Joe Aldeguer has devoted his vocation to teaching people how to make money and build wealth through asset attainment, including homeownership and sound investments.