I did yet another listing presentation today where the sellers are a stones throw from foreclosure. Their obvious confusion as to the options open to them and the consequences of ignoring the can of worms that looms open before them. I've seen so many people in these circumstances who deal with it by burying their head in the sand, or just outright refusal to get to grips with the situation, that it is becoming almost tedious.

What can be done to educate home owners who have lost their jobs, or are in ill health and can't work, or any other number of reasons that they are struggling? How can we keep them from spending what's left of their savings fixing up their house in an effort to get top dollar for a property that went slowly and steadily underwater months or even years ago? I hear the arguments all the time: "Surely my house can't be upside down? We live in such a sought after area." And: "So and so's house is on the market just down the road for X dollars. Why is my house worth so much less?"

You've gotta be kidding me! These comments come from homeowners living in a neighborhood full of For Sale signs, where the only sales to actually close recently were short sales and a couple of REO's (Bank Owned). Somehow, they still don't get it! 

Here's the other one along the lines I hear a lot: "My poker pals tell me that if I stop paying my mortgage that I'm safe for at least 3-4 years, and then I can do a short sale." "My neighbor tells me that he's heard that the banks are not going to foreclose on any more homes and it will all get worked out if I give it more time."

Or this one: "If I pave the driveway it'll sell, that's all that's stopping it isn't it? The last Realtor told me that our price was right, but she can't have done her job well because we didn't get any offers at all. So how about I pave the drive and I you can put it on at a higher price next time....." Dear God! Do I have to spell it out with the children's magnetic letters on your fridge???

What is the media doing? Why are people sooooo confused? What can be done to educate people that what they had is gone or going very fast. How can we convince them to stop spending and throwing dollars into a deep hole and to instead start saving. Live according to your means, and stop dreaming that all this will go away and the prices of the boom will return next month as if by magic!

We all need a reality check. Especially in need are the Realtors who fill these poor folks with false hope and put them into an unrealistic contract that guarantees their failure and hastens their decent into the foreclosure whirlpool. Getting a listing by promising the moon, by agreeing to the seller's inflated price just to get "another listing" wastes the Realtor's time and ruins the sellers' chance to get out of the hole they continue to dig. The first thing to do to get out of a hole is to stop digging!

Instead of trying to sell their house for a dream price, sellers need to be told (a.) the true value of their home at the moment, (b.) at what rate the price will decline in the immediate future. (Yes, prices are still going down. Check RealtyTrak.) And (c.) that a short sale may be their best option. Sellers who are so afraid of paying commissions and fees don't realize that THEY DON'T HAVE TO! In a short sale, Realtor's commissions are paid by the bank. Closing fees are paid by the buyer. Sellers are the ones upside down. They have no money! How could they be expected to pay commissions and fees?

Sellers, please, please get some quality help. Not from the bank your mortgage is with. They are only interested in helping themselves and protecting their investment. Not from the mortgage lawyers who are raping unsuspecting home owners with stiff fees and producing no solutions. Instead, find a knowledgeable mortgage lawyer who charges a reasonable retainer (yes they are also paid by the lenders at closing,) doesn't make outrageous promises, and can really help. Consult your local bar association for attorneys in your area and interview several.

 Don't bury your head in the sand. The economy and your problem won't solve itself. And you are not alone. It is no longer a shame to have trouble with your mortgage or your house payment. 40% of the homes on the market today are distressed properties. And there are plenty more in the pipeline.