How Job Loss Can Cause Distressed Properties
Life can be unpredictable, especially when it comes to jobs. Today you're sailing smooth, tomorrow the winds might shift, leaving you wondering how to make ends meet.
But what about your home, the one you worked so hard for?
It turns out, job loss can have a domino effect, putting your house in a difficult position.
In this post, I’ll explain how losing a job can make homes distressed.
Also Read: Other Causes Of Distressed Homes
1. Job Loss Leads To Loss Of Income
When people unexpectedly lose their job, they also lose their main source of income.
The majority of individuals lack substantial savings, leaving them vulnerable to running out of funds while attempting to meet their daily expenses.
Even those receiving unemployment benefits will only get a percentage of their monthly income.
So without enough income coming in every month, it becomes extremely difficult to afford essential costs like housing payments.
2. Homeowners Fall Behind On Payments
At first, homeowners might try to manage by not paying other bills, but eventually, even paying the monthly house payment becomes impossible.
As the mortgage becomes delinquent, many find themselves forced to make difficult financial decisions just to get by.
They may cut back on groceries, medical care, or other essentials to try to scrape together enough for the mortgage. But even with these cutbacks, most still can't catch up.
So, they fall further behind each month.
After 90 days of missed payments, many have no other option but to default on their home loans.
This default sets off a legal process by the bank to recover their money, which could lead to the homeowners losing their house.
Also Read: Selling A House In Preforeclosure
3. Properties Become Distressed
Once homeowners default, the properties start becoming distressed assets.
The home transitions into the initial stages of foreclosure, with the bank taking legal action to recoup losses should the payments not resume.
And since the owners are financially strapped, homes often fall into disrepair as basic maintenance is neglected.
Issues like leaky roofs, faulty electrical systems, and overgrown yards go unaddressed. Plumbing and HVAC systems degrade without upkeep.
Meanwhile, the owner nervously waits for the outcome of the foreclosure process, unable to stop their home from turning into a distressed property.
These once well-maintained homes turn into deteriorating foreclosure properties with uncertain futures, creating eyesores in the neighborhood and lowering nearby property values.
4. Compounding Factors
Besides the immediate impact of losing a job, broader economic conditions can make things even worse for the newly unemployed.
Factors like dropping home prices because of a flood of foreclosed houses make it harder to sell or get out of underwater mortgages.
Increasing costs for things like food and gas put extra stress on tight household budgets.
People who lose their jobs often lose their employer-provided health insurance too, adding another financial burden. All these compounding elements amplify the effect of job loss on housing distress.
Wrapping Up
Losing your job and worrying about your house can feel overwhelming.
But remember, there are people who can help!
If you're facing this situation, there are programs that might be able to ease the burden of your mortgage payments. Talking to a financial advisor can also give you some ideas on how to manage your money better.
Sometimes, selling the house before it gets taken away by the bank might be the best option.
The important thing is not to give up. There are ways to get through this tough time, and you don't have to face it alone.