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We bought our house in Hopatcong 5 years ago with the hopes that we would be in it for a couple years, sell, and move closer to our family & jobs. As with everyone else, our value has gone down and now we're stuck. We have considered a short sale but are afraid of how it will affect our ability to purchase another home. Our other alternative is to rent the house out, but will that also hamper our ability to purchase another home?
Yes, either will hamper your ability to buy another home. Here's some things to think aobut.
Renting your home is better than a short sale. A warning - a major pit fall to renting your home is -- while a lender will look with favor on the rental income and it will help your cash flow, you must be able to make it without the rent. In the rental property biz - tenants don't always pay, property is vacant between tenants, repairs still need to be made. So take it into consideration before maxing out every dime.
A short sale will not end all your problems. As I recall the feds no longer consider the amount "forgiven" as income. You will want to check the current tax laws with your CPA. Additionally, even after a short sale is complete - the lender may not "forgive" the shortage. You may still be responsible for it and they can proceed with collection.
You really need to seek advise from your tax advisor and your attorney before making a move!
Best wishes.
Thanks for the info. We figured that the whole renting scenario was too good to be true. A realtor also told us that we should look into getting our mortgage readjusted which would bring our mortgage payment down (hopefully) and then rent it out. At this point, I guess we're just stuck.
A short sale will ding your credit so badly that you won't qualify for another mortgage and you have to have shown solid payments for a couple of years after a short sale in order to qualify to repurchase, generally speaking.
I agree that modifying your loan to get your payments down might be an option, but I doubt it. The new rules are that if you have 30% equity in your home, you can use 70% of the rental income to use as income in trying to purchase a new home.
So if you have a home worth $200,000 today, you have to owe no more than $140,000 in mortgage on it in order to qualify to rent it in order to purchase a new home. Since you are talking about a short sale, you don't have 30% equity in your home. You won't qualify to use rental income.
So your choices appear to be 1) rent your home, move and then rent where you want to be, or 2) try and negotiate a short sale and then rent where you want to be, or 3) stay put and not move.
Last edited by Silverfall; 06-12-2009 at 01:36 PM..
Reason: typo
I am trying not to be snarky, here....this sounds like you are considering a short sale because it is no longer convenient to own this home and its value did not appreciate as you thought it would.
Most short sales do not close as such and progress to foreclosures. Your credit will be destroyed to the point that you might have a challening time finding a rental that will accept you.
Is there a reason why you cannot stay put and ride it out?
Is there a reason why you cannot stay put and ride it out?
Because they screwed up and thought they were gonna get rich off real estate in a short turnaround time, bought high, and now are whinny that things didn't work out their way.
Equivalent of someone watching a roulette wheel hit red 7 times in a row, bet on black, and then get upset and demand their money back when their "sure thing" failed to materialize.
"I am trying not to be snarky, here....this sounds like you are considering a short sale because it is no longer convenient to own this home and its value did not appreciate as you thought it would."
"Because they screwed up and thought they were gonna get rich off real estate in a short turnaround time, bought high, and now are whinny that things didn't work out their way."
First of all, I didn't ask for opinions I asked for advice. Secondly, you don't get rich off of properties located in Hopatcong. Before you open your mouth, you should do some research.
My husband and I both worked near each other (approx. 30 mi away from home) and were able to commute together. However, 2 months into the purchase of our home he was laid off. Unfortunately (or fortunately depending on how you look at it) he was able to find another job which is about 40 miles away -- in the opposite direction of where he originally worked. He figured he would be able to find something closer in time but it hasn't worked out that way. We rarely see each other and it is putting a strain on our relationship. We would not have a problem staying in our current home because we have already established friendships and our children are involved in school, sports, etc. We didn't purchase a home where we wanted to live because they were too expensive. Thank God, we didn't make the same mistake as our friends and bought into the inflated market where homes in our choice of areas to live were going for about $400k for a cape. Unlike a lot of people, we are not in foreclosure or in any danger of it. We would just like to have a better quality of life.
Location: Sometimes Maryland, sometimes NoVA. Depends on the day of the week
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Quote:
Originally Posted by Slydragonfly
Unlike a lot of people, we are not in foreclosure or in any danger of it. We would just like to have a better quality of life.
I thought a short sale was an extreme measure to prevent foreclosure? Why would a bank approve a short sale when you are in no danger of forclosure? Because you regret moving there? Maybe you should have rented first.
And I do understand where you are coming from. We moved in early 2007, selling one house and buying another. We hate it here. Can't sell. I'm debating options to allow me to go back to my previous job, 90 minutes away. I really wish we hadn't bought. Or maybe we should just accept we'll be giving up our gains (that we really shouldn't have made) from house #1. But I'm not going to ask for a short sale. Then again, even with the downturn, I'm not upside down on my loan. Yes, the house is worth less than we paid (probably even with all the remodling we did), but the rest comes from the money we put down.
[quote=Slydragonfly;9304981]" l
Unlike a lot of people, we are not in foreclosure or in any danger of it. We would just like to have a better quality of life.
/quote]
I would venture to guess that lots of people are in your situation. I would love to sell my home and move back to the area where I grew up for better air schools, better climate, etc. My husband travels out of state each week for his job. His territory covers half the US and all of Central America and the Islands. We have no family here (the closest reliable family is 11 hours away).
But - I will not jeopardize my excellent credit or become a burden on the consumers/taxpayers (remember: banks exist to make money - short sales mean less profit for banks meaning they eventually seek it from other sources).
In the meantime, I market my home aggressively, am preparing my personal finances for a major price cut if needed, pay school taxes and private school tuition, and spend quality time with my extended family when possible.
I understand your wanting to move but, as someone in a similar position, I don't understand your thinking. I say stick it out.
"I am trying not to be snarky, here....this sounds like you are considering a short sale because it is no longer convenient to own this home and its value did not appreciate as you thought it would."
"Because they screwed up and thought they were gonna get rich off real estate in a short turnaround time, bought high, and now are whinny that things didn't work out their way."
First of all, I didn't ask for opinions I asked for advice. Secondly, you don't get rich off of properties located in Hopatcong. Before you open your mouth, you should do some research.
My husband and I both worked near each other (approx. 30 mi away from home) and were able to commute together. However, 2 months into the purchase of our home he was laid off. Unfortunately (or fortunately depending on how you look at it) he was able to find another job which is about 40 miles away -- in the opposite direction of where he originally worked. He figured he would be able to find something closer in time but it hasn't worked out that way. We rarely see each other and it is putting a strain on our relationship. We would not have a problem staying in our current home because we have already established friendships and our children are involved in school, sports, etc. We didn't purchase a home where we wanted to live because they were too expensive. Thank God, we didn't make the same mistake as our friends and bought into the inflated market where homes in our choice of areas to live were going for about $400k for a cape. Unlike a lot of people, we are not in foreclosure or in any danger of it. We would just like to have a better quality of life.
Sorry to screw up your theory.
I point to your opening statement:
Quote:
We bought our house in Hopatcong 5 years ago with the hopes that we would be in it for a couple years, sell, and move closer to our family & jobs.
And ask....Why would you take on a 30 year contract (rather than rent) for a couple of years?
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