For Sale By Owner

Apart from the main track of foreclosure crisis having their pressure on home sellers through MLS listings, FSBO category or flat-fee brokerage listings in not getting the expected price, there is also a side-track. These home sellers come into the segment of acquiring their properties in 2004 or so, when the housing market was at its peak.

During these boom years, most of the borrowers opted for a popular mortgage loan of 30-years terms with adjustable rates of interest – ARMs. The attraction was the interest rate will be below the current market rate at the time of borrowing, popularly known as “teaser rate” and will be fixed for the first 3 to 5 years of repayment. Once this initial period ends, the ARM will reset according to the fluctuation of the financial markets prevailing. Generally in a sound economy the reset will not be a huge one but as the ill-luck of the then borrowers would have it, the U.S. economy slipped downward towards the end of 2005. This started a chain reaction for the ARMs to go beyond the expectations of the home owners making it very difficult for them to make repayment installments promptly every month. The hike was so huge that many of them had to default in repayment and forfeit their homes to foreclosures.

This created a huge deficit for funding further loans by the financial institutions on the one hand and the abundance of availability of foreclosure properties at a fraction of their value caused untold hardships to home sellers on the other. They could not get the expected price for their properties from home buyers responding to their advertisements in MLS listings, FSBO category and flat-fee brokerage listings.

As an added concern for them a number of home owners will meet with the swelling of their repayment installments by the reset of ARMs in 2008. Eventually these home owners have to go in for re-financing their properties to escape foreclosure of their homes. But due to the credit-squeeze, the mortgage lenders are inevitably putting forth stringent conditions for re-financing after their bitter experience earlier. While home owners who have good credit history, reasonable income for regular repayment and at least 20% of the equity left in their property by valuation can easily qualify for re-financing, others will find it rather difficult. Especially those who had barrowed on “stated-income” category and inflated income figures at the time of borrowing will have to suffer.

If these home owners do not want to sell their properties through MLS, FSBO or flat-fee brokerage and retain their homes, they can repay their earlier mortgage and go in for re-financing. Alternatively, they can talk to the lenders to re-structure their repayment options.