Mortgage Mortgage

When the market changes and values drop in real estate, depending on what state you buy in will dictate what happens if your home is foreclosed on and sold at auction.

What many don't know is that the bank can take your home, sell it at auction and come back to you for the difference by filing a deficiency judgment . One of the things that can stop them is if you bought your home in a state that uses Trust Deed to file ownership. Trust Deeds do not allow lenders to go after you after auction . Whatever they sell it for is what they get.

In some states there is a "Homestead Act" that protects equity up to a certain dollar amount ($75,000 in California) over what you owe on your home so if creditors try to come after you and claim "they will take you home and you will be left with nothing", realize its not true and you WILL have something.

But remember the difference between market factors and economic factors so if the market turns you don't shoot yourself in the foot and lose your home when you shouldn't have.

What are we saying by the last statement? well since the 80's we have seen the real estate market go up and down and up again. We have also been involved with thousands of home owners that paid too much or got a bad loan in their mind and they let it cloud the right perspective to have.

Market factors - An example is a Mr. and Mrs. XY, they had to wait in line to get to get on the list just to be considered by the development company of a new home project. They bought the house and in the first 2 years the value soared and they made the payments without even thinking about it because they had so much appreciation. They felt so good about what they did. Then the next 3 years the market turned and the home was now worth $100K LESS than they owed. Gradually their disposition turned negative and with it came their ability to make the payments. This couple let the market get the best of them and let the property go into foreclosure. Why? because mentally they attached their willingness to pay to the value of the property. They worked themselves up because of neighbors and coworkers possibly selling short and leaving. That same property? 5 years later is worth triple what they owed because the market came back. The people that bought it owned it the same amount of time as the first owners but now have $380K of appreciation. If they would have kept the right mental attitude and weathered the real estate market they would be living a different life financially.

Economic Factors - Cuts in pay, layoffs, industry wide reductions of work are a few examples. If they give you a pink slip out of the blue that's hard to adjust to right away and might affect you financially. However, for the most part when economic factors happen there is usually a change in weather before the storm actually hits you. But just like Market factors Economic factors can be weathered too.

The power of home ownership is that if you prepare BEFORE you can weather both factors . By having a Home Finance Protection makeover  before these things happen you WILL avoid these factors, weather the storm and come out stronger than ever.

Just don't lose perspective . Barring finding nuclear material in your back yard, your home value WILL bounce back and make up for any temporary analysis that you aren't doing well.

Another thing, some clients sabotage themselves because they feel they got screwed on the terms on the deal .

Let it go, in the coming years the market WILL erase the mistakes you made . In 5 years when the house has a ton of equity, it won't matter if you paid $10,000 more than you thought you should, or the property needed more TLC than was disclosed. It won't matter if the loan you got had pre payment penalties they didn't fully disclose but got you to sign. Let it all go and realize the best investment is one that is made.

In other types of investments you should stay upset but real estate is not like stocks......businesses go out of business so your stock will be worthless but until that big meteor hits the earth or the aliens decide to come and take over, real estate will still be here after you and growing in value.