What is a Distressed Property?

• Property that is poor physical condition
• Property that is or will soon be in some stage of the foreclosure process
• Property owned by a person who is experiencing a period of financial instability
• Property on which the mortgages total an amount higher than the current value and an owner must sell   

 What Could Cause a Homeowner in Distress?
There are many factors that can cause a homeowner to find themselves in distress. Especially in today's climate of economic turmoil.

1. Payment increase or mortgage adjustment
2. Loss of job
3. Business Failure
4. Damage to Property (lack of insurance and inability to make repairs)
5. Death of a Spouse
6. Death of Family Members
7. Severe Illness
8. Inheritance (beneficiary unable to cover bills, utilities, maintenance of property)
9. Divorce
10. Separation
11. Relocation (inability to support two households)
12. Military Service (extended active duty)
13. Insurance or tax increase
14. Reduced income
15. Too much debt
16. Property Value Decline

What does it mean when a homeowner is "Short" on the closing?
When a borrower owes an amount on the property that when combined with closing costs and commissions, is higher than the current market value.

A Short Sale Occurs when:
A negotiation is entered with the homeowners mortgage company or companies to accept less the full balance of the loan at closing. A buyer closes on the property and the property is sold "Short".

A Foreclosure Occurs when:
There is a legal proceeding by the lien holder in which they take back the property in order to recover the amount owed by the homeowner.

Are Lenders Willing to Work with Homeowners to Do a Short Sale?
Absolutely. In fact, so much has changed in the past year or so. Programs have been put into place, and lenders are wanting homeowners to communicate with them as soon as they feel they might be in trouble. The government has programs available to help as well in their Home Modifcation Affordable Program (HAMP) or Home Affordable Foreclosure Alternatives (HAFA). To read more about HAFA visit their website.

Helpful Links:

The Foreclosure Process in Arizona (City of Phoenix)

A Foreclosure Time Line (City of Phoenix)

How to Avoid Foreclosure Scams (City of Phoenix)

Questions about Home Foreclosure and Debt Cancellation According to the IRS

Common Foreclosure Terms and Their Meaning (City of Phoenix)