There are lots of reasons a family might not be able to make their mortgage payment, even in good economic times. Unfortunately, the economic fallout from the Coronavirus pandemic has led to tens of millions of job losses, and we’re starting to see a spike in mortgage defaults. Foreclosure is a nightmare to any family going through it, no matter the reasons why they are struggling to make their payments. Today we are going to look at what happens if a homeowner in default simply walks away from their house in Salem, Woodburn, or anywhere in the Willamette Valley.
Foreclosure Effects in Salem
- Loss of your home – I don’t just mean losing a building. I’m talking about your home. Everyone has to live somewhere. Even if you end up moving in with a friend or family member, you need to have a plan for where you’re going to go. As long as you’re planning your future, you should come up with a plan to avoid foreclosure. Almost any option you choose will be better than letting the bank take your house, and the sooner you start planning the more options you’ll have.
- Decrease in Your Credit Rating – Your credit rating will be lowered by the foreclosure. How much? It depends on how high your current credit score is… but the higher your current credit score… the more your score will drop after a foreclosure. If you have a credit score of 680 or higher… you may see a drop of 100+ points. If your house is foreclosed on, the foreclosure stays on your credit report for seven years from your first missed payment. That may not seem like it matters today when you’re struggling. But seven years is a long time…plenty of time for you to get a new job, get your debt under control, and start thinking about buying a house again. A foreclosure on your credit report won’t prevent you from getting another house in the future, but it will reduce the number of loan options available to you and raise your interest rates. Basically, if you’re already in a hole, letting the bank take your house will make that hole even deeper.
- Deficiency Judgement – So you’re thinking if you just walk away from the house you can start over with a clean slate? But imagine if your bank still came after you for money owed even after they auctioned off your house? Depending on the specific wording of your mortgage agreement, it can happen. In what’s called a judicial foreclosure, the bank can still come after you for the remaining balance if they sell your house for less than what was still owed on it (plus legal and administrative fees).
- Tax Penalty – So let’s say your mortgage agreement calls for a non-judicial foreclosure, which, in Oregon, will prevent the bank from coming after you for any additional money owed. Great, you’re in the clear, right? Nope. The government is going to take this opportunity to kick you while you’re down. Any money that you would have had to pay that gets forgiven by the bank is now “income,” which you will have to pay taxes on.
- Depression and Stress – It may seem simpler and less stressful to let the bank take your house rather than come up with an alternative solution, but all the unexpected consequences will weigh on you. Your mental health is at stake because of the high pressure situation. Going through a foreclosure is emotionally exhausting and frustrating to say the least.
- House Values In Your Community – Another one of the big foreclosure effects in the Willamette Valley is that they tend to lower the overall value of the houses in your neighborhood. If you’re worried about losing your house, you may wonder why this matters to you. The reason is because you are not the first of your neighbors to have trouble making payments. If they go into foreclosure first and start dragging the value of your house down, it might make it harder for you to sell before you’re in foreclosure yourself. You might want to share this article with your friends and neighbors to protect the value of your own house.
How You Can Ease The Effects Of Foreclosure In Salem
If it seems like I’m trying to convince you not to let the bank take your house, it’s because I am!
For the well being of you and your family, I recommend doing everything you can to avoid foreclosure. The process can be frustrating and time consuming, but there are people who can help you navigate your different options in the process.
First…
- Call your bank and work with them: The bank does not want your house. This is even more true when they have lots of customers defaulting on loans. Most banks are very willing and ready to work with you… if you can show that with their help you can get back on track and save your house. Or, if you just want out of the house but you owe more on the house than it’s worth… see if the bank has any programs to lower the mortgage burden so you can get out from underneath it without it going through an expensive foreclosure.
- Talk with a local real estate expert, like Willamette Home Buyers: We know the local Salem real estate market well and are very experienced in the foreclosure process here in Oregon. Give us a call at 503-383-1686 and we can guide you toward the resources that can possibly help you.
- Sell your house: One great way to avoid foreclosure is to sell your house before you fall behind on payments. Putting your house on the market with a real estate agent is one option, but sometimes your house needs too many repairs to sell to a traditional buyer, or you don’t have time to wait several months to get an offer and close the sale. If you’d rather sell your house quickly and without the hassle of a traditional listing, we can help. We buy houses in Salem, Corvallis, Albany, McMinnville, and throughout the Willamette Valley… and would love to look at your situation and make you a fast, fair offer on your house. Just call or text us at 503-383-1686 or shoot us your details through this website.
With the above knowledge on foreclosure effects in Salem, you can guard yourself by calling Willamette Home Buyers at 503-383-1686 and we can help you avoid the frustration and hassle that typically comes with selling your house. If you’re interested in a fast, fair offer for your house, fill out our website contact form to give us more information about you. We’d love to connect with you and help you find the best solution to your real estate problem!