When mortgage payments become difficult to manage, it helps to understand your options before deciding what to do next. One place to start is your home equity. You may have more of it than you realize, and it may give you a way to sell your home rather than go through foreclosure.
That does not mean selling is the right answer for everyone. It means your home’s value and the amount you still owe deserve a closer look. Start with your own numbers, then work with professionals who can help you understand what those numbers mean.
Why Equity Matters in the Foreclosure Conversation
The research cited in the original article offered a reassuring view of the housing market. Experts did not expect a large-scale foreclosure crisis like the one associated with the earlier housing bust. Their reasoning centered on tighter lending standards and historically high homeowner equity.
Mark Fleming, Chief Economist at First American, explained that lending standards had been much tighter in the housing cycle he was discussing. Combined with historically high equity, that supported his expectation that there likely would not be a surge in foreclosures.
Data from the Mortgage Bankers Association also showed that the overall percentage of homeowners at risk was decreasing significantly over the period examined. The volume of homeowners at risk was very low, although a small percentage still faced the possibility of foreclosure.
Those findings describe the conditions covered by the original research, not a guarantee about every market or every homeowner. The practical point remains straightforward: even when the broader picture is reassuring, an individual homeowner facing hardship still needs to understand their options.
Understand What Foreclosure Means
If you are having trouble making payments, the terminology can make an already difficult situation feel more confusing. Start with a plain-English understanding of foreclosure.
Investopedia explains it this way:
“Typically, default is triggered when a borrower misses a specific number of monthly payments . . . Foreclosure is the legal process by which a lender attempts to recover the amount owed on a defaulted loan by taking ownership of and selling the mortgaged property.”
The important distinction is that financial hardship and foreclosure are not the same thing. The original article identified alternatives that may help a homeowner avoid going through the foreclosure process.
Before choosing a path, it is worth asking whether selling the home using the equity you have built could be an option. That question starts with understanding what equity actually is.
What Is Home Equity?
Equity is the difference between your home’s market value and what you owe on it. Home price appreciation can increase that difference. Mortgage payments that reduce your loan balance also contribute to the equity picture.
The original article pointed to substantial home price appreciation over the period it covered. As a result, many homeowners had far more equity than they realized. It also noted that people who had owned their homes for several years were likely to have seen significant growth in their home’s value and equity.
CoreLogic’s report cited in that article put average total equity per borrower at almost $300,000, the highest level in that data series at the time of the report.
That figure is a finding from the cited report, not an estimate of what you have in your home. Rather than assume that an average applies to you, focus on two questions:
- What could your home sell for?
- How much do you still owe on your mortgage?
Looking at both helps you move from a general discussion about equity to a conversation about your own situation.
Could Selling Help You Avoid Foreclosure?
If your home’s market value is higher than the amount you still owe, you may be able to use that difference to your advantage. The original article’s central recommendation was to explore whether you have enough equity to sell and protect your investment before pursuing other alternatives.
Rick Sharga, identified in the original article as Executive VP of Market Intelligence at ATTOM Data, described evidence that some borrowers were taking that approach:
“Very few of the properties entering the foreclosure process have reverted to the lender at the end of the foreclosure. . . We believe that this may be an indication that borrowers are leveraging their equity and selling their homes rather than risking the loss of their equity in a foreclosure auction.”
Notice the wording: this was a possible explanation of the findings, not a promise that every homeowner could sell successfully. Still, it reinforces why checking your equity is a useful step when you are facing mortgage difficulties.
The question is not simply whether you want to sell. It is whether a sale is an available option worth exploring in your circumstances.
Know the Other Options Identified
Selling is not the only alternative discussed in the original article. It also listed:
- Reinstatement
- Loan modification
- Deed-in-lieu of foreclosure
- Short sale
Use this list as a starting point for a conversation, not as a recommendation to choose a particular option. If selling is not your best alternative, the next step is to have someone review your unique situation and help you understand the possible paths forward.
Work With Professionals to Get a Clearer Picture
A local real estate professional can estimate what your home could sell for based on recent sales of similar homes in your area. That gives you a more useful starting point than guessing at your home’s value.
Ask for help understanding that estimate alongside what you owe. Keep the conversation focused on whether a sale may help you avoid foreclosure and protect the equity you have built.
If you need to explore other options, a real estate agent can also connect you with other industry professionals, including housing counselors. Those professionals can look at your circumstances and offer guidance on next steps if selling is not your best alternative.
Take the Next Step
You do not have to choose a solution before you understand your position. Start by reviewing your mortgage balance and asking a local real estate professional for an estimate of your home’s value.
If you are facing hardship, reach out to Ed Parcaut to talk through your questions, explore your options, and see whether selling your home may offer a path to avoiding foreclosure.
