FOX5HomePros.com - Local. Las Vegas.
Doing the Right Thing - Part 2
By Mark Karten on Janury 31, 2010
Last week, I talked about "Doing the right thing" - specifically, if you owe much more than your home is worth and the chances of having positive equity are slim to none in the foreseeable future, what should you do? Do you keep paying your mortgage because you agreed to the terms and there's no justifiable reason to default? Or, do you take advantage of the system in place to short sell your home and either rent something much more affordable or buy one of the current foreclosure bargains on the market?
I heard from a lot of readers and the answers covered all bases. Logically, if your home is worth $100,000 less than you owe and homes normally appreciate between 3-4% a year - it would take at least 11 years to have positive equity in your home, once homes start to appreciate again. (Here's my math: $200,000 current value of your home x 4%/year for 11 years = $307,000.)
Some people said they had no intent on moving, so they can wait until the market turns around. Others feel duped and want a bigger, better home for half the price. A few people have justifiable hardships and want to use the system in place to move on with their lives and finances.
A day after my column, there was a story on AOL's Housing Watch entitled "The New Mortgage Revolution - Walk Away" - click HERE to read. Obviously this is a trend that is going to gain momentum throughout the year.
Let's look at all sides of this story. As a homeowner who can successfully short sell your primary residence, depending on whether you're delinquent on your payments, you may be able to walk away with no tax consequence and purchase another home immediately (the FHA just changed their rules allowing this to happen.) If you are delinquent, you could re-purchase in as little as two years.
If you have a second home or investment, depending on the circumstances, you may also be able to lose the albatross around your neck and breathe easy again. It will have an effect on your credit, but in varying degrees.
What about your neighbors? Their values may continue to decline because of your decision and you'd be contributing to the decreased prices of the homes in your neighborhood. So your outlook is either, "I've got to take care of myself" or "I'm concerned about what will happen to my neighborhood." The answer is personal to your situation, and as I said last week, I'm here to explain what options and choices you have, specific to your home and your circumstances.
If you choose to move forward, I work with legal and tax professionals who can help minimize the effects of a short sale and a bad investment decision.
"Doing the right thing" is a very personal decision based on your circumstances. For many, it's an emotional rollercoaster. You don't need to go it alone, though. Even if you just want to talk about your options and how long it might take for your home to become a valuable asset again, please don't hesitate to email or call us.
Have a great week!
(Back)
|
Give your 