An Upside Down Mortgage and Remodeling

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If you have an upside down mortgage and facing foreclosure, do not remodel or spend any money making improvements thinking you will sale and make a profit.

Too many times, I have run into a person who has remodeled his home and added features that cost too much! For instance, if you put marble or granite countertops in your kitchen in a house where the other houses in that neighborhood do not have them, you probably will not add any more value to your home.

Maybe, you want to put wood floors in your home and the majority of the homes in your neighborhood have carpet. Again, it will more than likely not add any more value to your home.

They are nice features, but not if they do not add more resale value to your house.

Before you do any upgrades, ask a realtor to stop by and discuss your plans. He or she will work with you to get that future sale. Be honest and tell him or her that you have an upside down mortgage and you will get the best results.

Having the largest and most expensive house in the neighborhood may not be a good thing. If you are not careful, you can have the most expensive house in a neighborhood that no one but you wants. It will become your albatross. By the same token, the smallest and cheapest home in the neighborhood may also not have good resale value.

A Competitive Market Analysis (CMA) supplied by the realtor will average square foot cost and determine what the average sale value is in your neighborhood. This is not what the house is worth, but what the realtor thinks someone is willing to pay and they are wrong a lot of the time too.

Here are two examples:

• Sometimes, a realtor will undervalue the house to make it sale quickly.
• Other times, the realtor will over price the house and it will not sale at all.

I have talked to people that were getting close to foreclosure and have an upside down mortgage. The house has been on the market for months with no contract offers. They then plan to spend the little money they have making improvements thinking the house will be worth more and will sell before the bank forecloses. All this plan does is help the seller spend his or her money.

Then, there is the opposite seller or home stripper. The home stripper makes improvements and when the house does not sell, he or she strips everything out.

I have been in houses where the carpet is gone, light fixtures are gone, the entire kitchen has been stripped to the walls, cabinets and all. I have also been in houses where the water heater and air conditioning units have been stripped out. The attitude is: “If I can not have this, then the bank will not have it either.” The bank does not care.

It amazes me how many people get mad at the bank and destroy the property. It’s not the bank that did not make the payments. Now in all fairness, some banks did make predatory loans and the buyer NEVER should have bought the house.

In past years, banks relaxed requirements so that everyone could own a home. Prospective buyers stated income that was not verified and the bank approved their loans anyway. Another word for “stated income” is liar loans.

The bottom line here is - if you have an upside down mortgage and facing foreclosure, a short sale may be your best option.



An Upside Down Mortgage and Remodeling to Foreclosure Options

Bankruptcy Protection

Beware of Foreclosure Scams

Refinance Your House

Selling Your House

Short Sale

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