As a real estate agent, you have a vested interest in the financial success of your clients. When homeowners default on their mortgage loans and lose their properties to foreclosure, you not only lose customers, but you also see lower commissions as property values throughout the neighborhood plummet. By helping homeowners in your area keep their homes, you can do your part to stabilize the housing market in your area while winning loyal customers for life and perhaps even saving a few families in the process. But just what can you do to help?

The first step is to educate homeowners in your area. Most homeowners think they have only two options – pay up or move out. The fact is that more than a dozen options are available. Although all of these options may not be realistic for every homeowner, most homeowners can realistically consider at least four or five of the options on this list:

Loan modification: Also called a mortgage modification, this enables the homeowner to negotiate a workout solution with the lender to catch up on late or missed payments and lower the monthly mortgage payment by adjusting the terms of the loan. This is currently one of the best, most available, and most popular options.

Forbearance: Forbearance provides the borrower with a payment plan for catching up on missed payments. The homeowner is typically allowed to pay a few hundred dollars extra each month over the course of 18-24 months to catch up.

Reinstatement: Homeowners may be able to borrow money from relatives who are in a position to do so, to pay any balance that is currently overdue and then pick up on monthly payments as though nothing ever happened. (This is a practical option only for those who have recovered from a temporary financial setback and can now afford the house payment along with any payments required to pay back their relatives.)

Refinancing: Given the fact that credit is still pretty tight right now, this option may not be available. If the homeowner can qualify for a fixed-rate, low-interest loan to pay off a higher interest loan and perhaps even consolidate their debts, refinancing could be one of the best options.

Short re-fi: With a short re-fi, the lender agrees to accept as payment in full less than is required to pay off the balance due on the mortgage, and the homeowner takes out a refinance loan to make that payment in full. The end result is that the homeowner has a new mortgage with a lower balance and lower monthly payments.

Government loan programs: The federal government, through FHA, offers down-payment assistance programs and is developing other programs to enable homeowners to keep their homes. Encourage homeowners to contact their local HUD office to find out what’s currently available.

Bankruptcy: For homeowners who are buried in unsecured debt, including credit card debt, bankruptcy may be the best option. If you know some good bankruptcy attorneys in your area consider teaming up with them to offer your clients this option.

Selling the home: For homeowners who cannot or do not want to keep their homes, selling the home to “get out from under it” may be the best option. This is where you can really help – by listing the home and helping the homeowners find more affordable accommodations.

Short sale: For homeowners who face the prospect of selling the home at a loss, you may be able to negotiate a short sale with the lender on their behalf. With a short sale, the lender agrees to accept as full payment a partial payment of the loan. In most cases, a lender is more likely to go along with the idea if you already have an offer from an interested and qualified buyer.

Selling to an investor: If you know investors in your area who have the cash to purchase properties, you may be able to put the homeowner and investor in touch with one another to work out a win-win deal. Investors are often in a better position to move quickly on a deal, and when you are in a foreclosure situation, time is often of the essence. (Be careful not to get yourself into a conflict-of-interest scenario here.)

Deed in lieu of foreclosure: For homeowners who are unable to make payments (even significantly lower payments) and cannot sell the property and at least break even on the sale, the lender may accept the deed in lieu of foreclosure. The homeowner should hire an attorney, however, to make sure that the deal allows them to walk away totally debt free and prohibits the lender from seeking a deficiency judgment. In some cases, the lender may be willing to pay the homeowner a small amount in exchange for keys and leaving the property “broom clean,” which the homeowner can use to move to more affordable housing.

Redemption: If you do business in a state that allows redemption, the homeowner has the right to buy back the property after the auction by paying the buyer the purchase price along with any qualifying expenses the buyer paid for. Check with a foreclosure attorney in your area or your county’s register of deeds to determine the redemption rights in your state.

Abandoning the home: Walking away is an option, but it is not always the best option, because it can leave some legal strings untied. In some jurisdictions, for example, the lender can sell the house at auction and then pursue a deficiency judgment against the homeowner for the difference between what the house sold for and the balance of the mortgage.

Do nothing: One of the worst options (second only to being victimized by a foreclosure rescue scam) is to do nothing, in which case the homeowners lose their home along with any equity they may have had in it and have to go through the humiliation of being evicted.

Warning: Inform distressed homeowners of their options, but do not take on the role of attorney unless you are a licensed attorney. Letting homeowners know about the various alternatives to foreclosure is a valuable service in and of itself. Let them decide which options are worth exploring and which option is best for them. Don’t try to steer them toward the option you think is best. If they choose to list and sell the home through you, bravo for you. If they don’t, you still succeeded in making a good impression and doing your part to preserve the American Dream of Homeownership and stabilize the housing market in your area.

Published: February 23, 2009

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Ralph R. Roberts, CRS, GRI is an award-winning and internationally recognized real estate agent, author, coach, and speaker. Throughout his career, Ralph has proven his commitment to helping other real estate and sales professionals build upon their past and present success, grow and expand their businesses, and provide a rich and rewarding future for themselves, their customers, their employees, and their families. As president and CEO of Ralph Roberts Realty, Ralph has personally helped thousands of consumers realize their dream of homeownership. While selling over 10,000 homes (and buying and selling over 3,000 investment properties) throughout his 30-year career, Ralph has made the time to mentor and coach hundreds of professionals in real estate, sales, and a host of other fields. Ralph is a recognized authority on Real Estate and Mortgage Fraud; Residential Real Estate; Personal Salesmanship; Sales Force and Office Management, Motivation, Design, and Team Building; and Foreclosure Self-Defense and Loan Modification, fields in which he has demonstrated his commitment to preserving the American Dream of Homeownership. Ralph's numerous websites, blogs, seminars, and speaking engagements engage, entertain, and educate both consumers and professionals. Ralph is also an accomplished author with several successful titles to his credit, including: Power Teams: The Complete Guide to Building and Managing a Winning Real Estate Agent Team Financing Real Estate Investments For Dummies (John Wiley & Sons) Mortgage Myths: 77 Secrets That Will Save You Thousands on Home Financing (John Wiley & Sons) Foreclosure Self-Defense For Dummies (John Wiley & Sons) Protect Yourself from Real Estate and Mortgage Fraud: Preserving the American Dream of Homeownership (Kaplan) Foreclosure Investing For Dummies (John Wiley & Sons) Foreclosure Myths: 77 Secrets to Saving Thousands on Distressed Properties (John Wiley & Sons) Advanced Selling For Dummies (John Wiley & Sons) Flipping Houses For Dummies 52 Weeks of Sales Success (John Wiley & Sons) Walk Like a Giant, Sell Like a Madman (John Wiley & Sons) Cross-Cultural Selling For Dummies (John Wiley & Sons) To learn more about Ralph, visit AboutRalph.com, check out his daily insights on real estate and mortgage fraud prevention at FlippingFrenzy.com, or visit his latest blog dedicated to helping distressed homeowners fight foreclosure, KeepMyHouse.com. You can reach Ralph at or by calling (586) 751-0000.