Real estate is a funny endeavor. There’s a real collective subconscious to it. Many times, I have seen a property which festered on the market for many months receive multiple offers the same day. No rhyme or reason, it just happens that way. The phenomena is similar in regard to overall market activity. The whole thing just kind-of churns along , and then BAM! It’s like someone turns on a big faucet, and the entire market heats up at once.
Today, I got to consult with three different clients who are in various stages of making some real difficult decisions. (Collective subconscious?) Maybe. Big faucet? Lets hope not!
If you’re a homeowner, it’s pretty certain that you’ve lost some value in the last couple of years. In some cases, you’ve lost a bundle. If you’ve only owned for a couple of years, you may owe a heck of a lot more on your little love shack than you could sell it for. What to do…What to do?
1) Keep making your payments and stick it out. This assumes that you haven’t lost your job, health, ability to rent it out for a reasonable return or something along those lines. Plus, when you signed on the bottom line, you meant it. Don’t hate me, but a signature used to mean more than a handshake, and a handshake meant everything.
2) Modify your loan. Some lenders are actually paying attention to the current climate. Turns out they don’t want your house either. Rather than take it from you, they just might renegotiate your terms. They’re not just gonna roll over and offer it up, but if you’re willing to work at it, it’s a viable option with some lenders.
3) Short Sell. This is where the bank (or banks if you tapped your equity) agree to let you sell your property for less than you owe. It’s a sticky process, and typically lengthy, but more and more lenders are seeing this as a better way out for them than foreclosing. They don’t need another home on their books.
4) Deed In-Lieu of Foreclosure. Basically, a foreclosure where you voluntarily send the lender your keys. If you’re unable or unwilling to continue making payments on your loan(s), this is a bit more tidy than foreclosure.
5) Foreclosure. Formally rare, and now common place. My understanding, is that the process used to take 4-6 months, and now many deed-holders are delaying that to twice as long. The deed-holder loses more here, as they generally have to do some repairs, and some other semantical junk prior to listing the property for sale below market rate to get it sold and off their books.
My knowledge is limited here! This is just a little info if times are tough. If you’re getting ready to make one of these decisions call your accountant and call an attorney. Make sure you understand all of the ramifications of what you choose. A big tax bill could be coming, even if you sell short.
Be careful. When looking out for number one, you’ll want to avoid stepping in number two. This to will pass. Make sure if you’re contributing to the “Big Faucet”, that you’re doing it for the right reasons. Real estate has always been the best and safest vehicle to creating wealth. And now with the equities markets being so unstable, even the media is starting to come back around to espousing the virtues of home ownership. If you like to buy things when they’re on sale, you ought to be out shopping!
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