How to Choose Between a Loan Modification and a Short Sale

I receive daily calls from sellers asking me whether they should do a loan modification or short sale.

Now, I'd be remiss if I didn't point out the financial aspects of certain situations. Say, your home's value has fallen more than 50% over the past couple of years. Many homes in California that were purchased since 2004 fit this bill. This means you could buy the exact same home next door for 50 cents on the dollar, providing you were able to do a short sale on your home. So, your mortgage would be half of what it is now for the same house.

Because a loan modification might not reduce the principal balance of your mortgage. Only about 10% of the loan modifications reduce the principal balance. Should you move next door and do a short sale? Or should you stay where you are and end up owing twice as much as your home is worth? Some people would say that's a no brainer. Others would say you promised to repay the loan so you should stick it out . . . read more about should you do a Loan Modification or Short Sale?

More Articles by Elizabeth Weintraub:

• How to Do a Loan Modification
  
• How to Qualify for a Short Sale
  
• A Short Sale vs. a Foreclosure

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_{At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.}