Sacramento Real Estate Views

Do You Have $333,178 To Waste?

The Strongest Case, So Far, To Sell Short And Avoid Foreclosure

I’ve been a proponent of the short sale process since lenders began cooperating in earnest around the middle of 2009.  Up to that time, I would not list one or show one to a potential buyer as the process had not be ironed out and such a small percentage were closing that it wasn’t worth the time.

A lot has changed since then.  Lenders are more cooperative and, while short sales are still difficult, they are getting closed and we are able to get people on their way toward a healthier financial future.

An Underwater Mortgage Is An Albatross Around Your Neck

If the value of your home is well below how much you owe, you are sitting on a financial time bomb.  The way it looks right now, as values continue to decline, your home won’t be worth what you owe on it for years to come.  A. Gary Shilling, a renowned economist, even goes so far as to say “sell your house, second home or investment single family houses yesterday…”.  Incidentally, Mr. Shilling predicted the sub prime collapse and subsequent economic downturn.

Click here for an article on this.

The State of California’s Short Sale Motto?  “Just Do It!”

The state of California has done all it can to make it easier for an underwater homeowner to sell their home short and avoid foreclosure.  With the passage of Civil Code of Procedure 580 e and the most recent amendment, there is nothing a lender can do on mortgages of 4 residential units or less to hold the mortgagee liable for the deficiency between what is owed on a mortgage and what the property sells for.

It doesn’t matter if it’s a principal residence or an investment property, the original loan or a refinance, 1st or 2nd mortgage, as long as the property is 4 residential housing units or less, you are not liable to the lender for the deficiency between what you owe on your mortgage and what the property sold for.

It’s the law.

Click here for the first article and here for the second article on 580e.

Lenders Are Paying Homeowners To Sell Short

This even has me scratching my head but think about it, if lenders are offering to pay you to sell short rather than go through the foreclosure process, what does that say about their confidence in the housing market nationwide?

What it says to me is that they would rather not lose any more money during the foreclosure process and therefore they are willing to pay people to sell their homes short which in turn saves them the trouble of having to hire a Realtor, an attorney, court costs, recording fees, and all other additional costs of foreclosure.

Click here for a recent article on this.

What more incentive do you need to improve the financial future of your family than this?  It seems as if the entire industry as well as the government is promoting homeowners who are underwater to walk away and with values continuing to decline with no thought about when they may reverse course, doesn’t it seem like a prudent decision?

Mortgage Guidelines Are Relaxing

One of the most frequently asked questions I get from underwater homeowners is “if I sell short, when will I be able to buy again?”

You know what the funny thing is about taking a couple of million people out of the mortgage pool?  Mortgage guidelines begin to relax to let them back in.

Think about it….homeownership is at the lowest it’s been since 1997 or so due to the housing downturn.  There are many people who are qualified to purchase homes but wisely decided to let their homes go and buy again in a few years.  This has left millions of potential buyers waiting to purchase who can qualify.

I was speaking with a broker friend of mine the other day and she was saying that she is finally pulling the plug on her underwater mortgage and walking away.   She remarked to me that the most amazing thing about the mortgage guidelines was that you don’t have to wait 4 years to purchase after a bankruptcy but that it had been reduced down to 2 years just recently.

I have been saying for the last 2 years that we should expect to see mortgage guidelines relax in the near future.  The last thing the mortgage industry wants is to put themselves out of business.  I predict that it will get even easier to purchase after a foreclosure or a short sale in the VERY near future.

The longest wait time I’ve heard of recently to purchase after selling short, foreclosure or bankruptcy is 3 years.  I know it can be done in 2 years.

Some Don’t Want To Lose Their Home

“Losing” your home is no fun.  It’s is very stressful and there can be a stigma about it although socially, that is on the decline.  It’s a little different when you think about it financially so lets look at some numbers:

Let’s say you bought your home in 2006, put 20% down and got a sweet 5% interest rate for 30 years.  The average home sold in Rocklin 95765 in 2006 was 4 bedrooms, 2.5 bath, 2336 square feet selling for an average of $533,326 with a payoff of $1,028,731.56. (OMG!)

In 2011 (so far), the average home was 4 bedrooms, 3 baths, is 2445 square feet and sold for an average of $317,871 with a payoff after 30 years of $695,553.47.

The savings in the purchase of these two homes, 2006 vs. 2011, is $333,178.09 over the life of the loan.  Considering values will not be coming back anytime soon, possibly over the next 15 to 20 years according to most economists, do you have over $333K to waste on an underwater mortgage if you purchased in 2004 through 2007?

The FACT is this:

Keeping an underwater mortgage is LONG TERM financial issue considering values aren’t going to come back in the nearer term.  Walking away from your underwater mortgage is a SHORT TERM issue that will be resolved in as little as 2 years!

The decision to sell short is a tough one and you should always consult your financial advisors regarding any decisions that affect your credit rating or financial liquidity.

If you’re considering selling short in the Sacramento and Placer county area, please call, text, email or simply fill out the form below and we’ll be happy to consult with you free of charge to weigh all your options as it regards to the short sale or foreclosure process.

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This entry was posted on Thursday, August 4th, 2011 at 4:58 pm and is filed under Short Sale Information. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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