The recession is over, at least according to statistics from the Federal Reserve. Yet many people are still feeling the fallout. Some who for several years have met their mortgage payments by dipping into savings are finally facing the harsh reality that they can’t hang onto an expensive property much longer.
“Many people lost well-paying jobs during the downturn,” says Eric Tyson, author of “Personal Finance for Dummies.”
He says the homeowners who cope best with the anticipated loss of a home are those who move forward decisively toward a sale rather than waiting until mortgage payments are late and foreclosure looms.
The number of homeowners in the foreclosure process peaked at 1.2 million in 2010 and has since fallen to 650,000, says Daren Blomquist, a vice president at RealtyTrac (www.realtytrac.com), a publisher of real estate data.
While many of these foreclosures were products of underwater mortgages, in which the current value of the house is less than the money owed, that’s now changing.
“Due to rising property values, one-third of those now entering foreclosure have positive equity, which meant they could have sold and probably walked away with some proceeds,” Blomquist says.
Tyson says that though a wrenching decision, an involuntary downsizing can sometimes have positives.
For example, some families appreciate the reduced upkeep demands that come with a more modest house, as well as the generally increased financial flexibility.
No matter the pros and cons in your case, you’re likely to fare better if you take a strategic approach. Here are a few pointers:
1 Don’t procrastinate on tough decisions.
Sid Davis, a real estate broker and author of “A Survival Guide to Selling a Home,” says many homeowners delay too long to make the tough decision to sell.
Multiple government and private sector programs are available to help homeowners struggling to keep their homes after a financial setback. However, assuming you’ve explored these programs and know you’re ineligible, Davis recommends you engage the services of a reputable real estate agent to list your property and attempt to sell it as promptly as possible.
2 Investigate your options for the future.
One approach to lessen the psychological pain of an involuntary home sale is to waste no time in starting to look at other places to live. The aim here is to select the best community you can afford, keeping your household expenses firmly in mind.
The primary advantage to exploring other neighborhoods early is to give you a tangible vision of your future lifestyle.
“You could be pleasantly surprised by some of the strong qualities of a more affordable neighborhood. For example, the new area might have better parks and more playmates who are the right age for your kids,” Davis says.
But he urges you to resist the temptation to tour specific homes until you’ve received a solid offer for your old place. “Why get your heart set on a particular house until you know how you’ll do financially on the sale of your present property?” Davis says.
3 Get active in the new community of your choice. Even before you’ve sold your house, you might wish to become acquainted with residents in your target neighborhood. As Tyson says, beginning to make friends in the new area can help make for a more comfortable transition when your move finally occurs.
“Perhaps you could start doing some volunteer work in the new community or your kids could join a sports league there,” he says.
4 Consider throwing a “farewell party.” As Davis says, one way to generate happy memories is to stage an informal “farewell party” involving the friends and relatives closest to you. Pose your guests for photos in the parts of the home you love most.
“Try not to view your move as a major setback. Instead, consider it a chance to reorder your priorities, find new friends and possibly discover a community more to your liking,” Davis says.