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We own a rental home, which was our primary residence, in Surprise. We bought for 220k in 2005. When we left January 2008, it was appraised for 235k, but we were actually seeing houses sell at around 180k at that time. We put 45k down in CASH to buy the house, have had renters in it since we moved, and have tried to do all we can to keep the house even while moving out of state. We owe 165k on it now and have really sweet renters who are taking care of the house, but his job is unstable and we never know from month to month if this will be the month they give up and walk away or if they're just a week late paying rent.
I have two questions:
1. I'm trying to search online for what our home would be worth now - just what's average to look for in Surprise. From what I can see, houses our size (1,800 square feet by the movie theatre, not in BFE) are going anywhere from 90k to 170k. Not being in state, I just don't know what to think! We knew we were upside-down in the house, but this data is saying we're either screwed or we have some equity.
2. In the event we're screwed and can't sell the house, we will have to foreclose. My husband is out of work, and has been since January. I work 70 hours a week to try to pay our own rent. We sold our house here and downsized to cover bills. We just can't keep up with both. I've also heard that rent has dropped quite a bit in AZ, and am concerned about being able to get $1,100/month in rent anymore. If we can't rent it and can't sell it and have to foreclose, is there some law being passed that's going to require we have to pay the difference? I saw something on a facebook friend's wall saying that AZ is passing a law that requires you pay back what you owe if your foreclosure resolves in 2010 or later???
Their is no current law on the books that would allow for recourse on a deficiency judgement in Arizona. You can try a short sale, but I doubt that will work because they fail to complete far more often than not. Depending on the subdivision, your house would probably sell for $110-$130K in nice condition.
There was legislation that was repealed that attached some deficiency liability. I am unaware of the status of any replacement legislation that would cover this. Of course, bankruptcy would remove any deficiency judgement if it came to that.
Give the sweet renters plenty of notice when you decide to default. There are plenty of choices for them in Surprise. Long-distance landlording on a severely underwater house; I do not see how that can possibly work out positively.
In the past, about 50% of short sales were successful. The success rate has increased now. Banks have added more staff and are more willing to take a short sale. Also, more professional negotiators have entered the picture and they have helped to increase the success rate.
You definately want to attempt the short sale before walking away and having the foreclosure on your credit score.
My suggestion is to look for a realtor in the Surprise area who specializes in short sales. S/he will give you information based on the comps for your home. Then if you find you need to do the short sale you will be ready to go.
I don't work the Surprise area and don't know anyone over there who is a short sale specialist, but I'm sure others here know someone. You do not want just any realtor. You need someone who has a track record of handling short sales.
Appraisal has nothing to do with current market value that you will get. Housing has been at its lowest this year and continues to plummet. Doesnt matter what money you put into the house when market is bad.
About short sales, I have mine on the market, and the real estate lady suggested I have a meeting with a real estate attorney, and I did.
The law in AZ is there is no recourse if you did not refinance your house, or borrow money from it, then on the tax part, people are tax exempt on letting the house go or selling short until 2012, IF the house has been your primary residence.
From what he said, if you foreclose, you may have tax issues for not living in it, because they only give you a break if you lived in it, and only used money for the loan to buy the house, no refinancing or taking money out of the house.
About my short sale, he asked if I have private mortgage insurance, yes I do.
He told me right then that I'm wasting my time trying to short sell, because if the bank says yes to a offer, the PMI company will say no, because if they say yes, they have to pay out a claim.
Told my real estate lady and she did'nt care, so I have to wait until the contract is up to get it off the market, she has never once shown the house, only other real estate people stop by with their customers to look while they are looking in the neighborhood.
Now I just tell them they have to come the next day, and they never wanna wait so they cancel, by the way, we explained with our agent we would like 24 hours notice, because nobody is supposed to be home, and we have a dog we have to take with us, when it was 110, it was to hot to just go walk around.
She never put that on the MLS listing, and I have asked over and over for her to do what we agreed, what disrespect to me, my wife and home!
The attorney I used is pretty reasonable, in person is 150.00 for a half hour short sale, foreclosure consultation, or 95.00 for a half hour phone consultation.
Don't ask me why it's cheaper by phone (maybe he is in his underwear at home) LOL!
I did it by phone, you make a appointment for when the phone interview will be a few days in advance, they email you papers with questions you find out about your loan so you have everything ready when you talk to the lawyer.
We went through the questions and I wrote down what he said to each one, also I wrote my additional questions and asked them after the standard questions, and wrote his answers down as well.
My friend went somewhere else and payed 350.00 for his visit!
About the rents being cheaper, my mortgage is $1,350.00, homes just like it in the neighborhood that I assume have been foreclosed and bought up by investors, are renting for $750.00-$900.00
Maybe it's people still paying near what mine is, and charge the low price to the renter, then cover the rest, I doubt it!
I've been here since 2005, and both houses on my sides have had foreclosures, we bought this house brand new, and were in ours when the houses on our sides were still empty, then people bought, then foreclosed, then others bought, and moved in.
House on my right since we moved in right after Thanksgiving 2005, one of the ones that was still not sold for a couple months when we moved in, has now had 6 families in and out of it.
My wife and I are one of the very few original buyers of these houses from brand new, and the neighborhood has gone down, a lot of the new people do not follow the HOA rules and have trash and weeds in their yards, play loud music, have junk cars that sit with flat tires, faded paint, spider webs from setting for over a year, and some on jack stands with no wheels, grease/oil spilled out on the driveway.
One car has/had a leaking radiator and they just put water in it, there is a huge rust stain on their driveway.
So, they might be renters, or homeowners, but they pay as cheap as $750.00 while I pay $1350.00 a month with a house that is worth maybe 90,000.00 that sold for 190,000.00 in 2005.
So, I've already been screwed out of all my down payment money, and will never get anything back, the only thing that has been holding me here is credit, because foreclosing will hurt it.
How much is credit worth if you are being screwed over really bad?
I have decided to let it go, it's like a snow ball, the more you wait and hope, the more $$$ you lose and will never get back, the snowball gets bigger.
How many other people are out there pacing back and forth on weather to keep their credit good and drown, or get out and start over?
This was my first house, was 28 when I got it, the plan was to have it payed off by 58 years old, or sell it and move somewhere else.
Bought it because I was afraid if I did'nt, houses prices would get so high I would never be able to get one, and every older person that was well to do told me you can never go wrong with real estate, HA!
Regarding AZ anti-deficiency law:
33-729. Purchase money mortgage; limitation on liability
Part A states that if the home is on 2 1/2 acres or less, which is limited to and utilized for either a single one-family or single two-family dwelling, then there is no recourse when the home is sold at the foreclosure sale.
Part B goes on to say that if the owner caused damage to the home that diminishes it's value, the lender does have recourse.
A HELOC is usually an unsecured loan and may not be covered under the anti-deficiency law.
CHECK WITH YOUR ATTORNEY on any of this.
The Mortgage Forgiveness Debt Relief Act , where one won't have to pay tax on the forgiven debt, is extended through December 31, 2012.
In a Short Sale, the lender may show the debt as paid in full, or forgiven, in which case they will send in a 1099 and you will have to send in a form. CHECK WITH YOUR ACCOUNTANT.
If the lender does not show the debt as paid in full, after a short sale, then they can't send in a 1099 because the debt isn't forgiven. Still you should check with your accountant for advice.
If they don't forgive that debt, then they have an unsecured position for the deficiency, and they can choose to try and collect it, or they can choose to write it off after some time.
A Short Sale in most cases, assuming loan modifications cannot be had, is better than a foreclosure because of the greater negative effect on your credit record.
Also, if one needs a security clearance, it will probably be lost along with the job that requires the clearance. If you need a security clearance in the future you may not be able to obtain one.
A couple of my short sale listings had PMI. On one of them, a $250,000 sale, the lender determined from the sellers financial statement that the seller could afford to pay $300 per month for 33 months on a $10,000 no interest note.
They required this note as a condition of accepting the short sale. The owner refused. The buyer really wanted the house, so we asked if the buyer would increase their offer by $10,000. They said yes.
The PMI company refused because the increased purchase price would go to the lender, not the PMI company.
So we made this deal between the PMI company, the seller and the buyer.
The buyer deposited in escrow a promise to pay off the $10,000 note of the seller at close of escrow.
The seller then signed the note and deposited it in escrow
At closing the buyer paid off the note and the PMI company was happy.
The buyer was still happy because they bought a great house at a great price.
On the other short sale with PMI, the sellers financial situation was that they could not afford any out of pocket money. The PMI company did not ask for any money from the seller. The short sale was approved.
Everyone was happy. Seller was happy because they didn't have to go through foreclosure. I was happy because I had been able to negotiate a deal that almost fell through.
About my short sale, he asked if I have private mortgage insurance, yes I do.
He told me right then that I'm wasting my time trying to short sell, because if the bank says yes to a offer, the PMI company will say no, because if they say yes, they have to pay out a claim.
Told my real estate lady and she did'nt care, so I have to wait until the contract is up to get it off the market, she has never once shown the house, only other real estate people stop by with their customers to look while they are looking in the neighborhood.
Now I just tell them they have to come the next day, and they never wanna wait so they cancel, by the way, we explained with our agent we would like 24 hours notice, because nobody is supposed to be home, and we have a dog we have to take with us, when it was 110, it was to hot to just go walk around.
She never put that on the MLS listing, and I have asked over and over for her to do what we agreed, what disrespect to me, my wife and home!
The listing agent's job is to market the home so that buyers and agents can find the home. The listing agent is only one out of some 20,000 or more Phoenix agents, so there is a very slim chance that the listing agent will have a buyer come to them for the house.
If you're getting calls for showings then the listing agent is doing her job. If you're getting showings it means the pricing is in the ball park. If you're getting showings but no offers, (1 offer per 10 showings is a rough rule of thumb) then the price (assuming location and condition are good) may be high.
It is not correct that a short sale will be denied just because it has PMI. See my previous post about my PMI experience.
You have more to lose by not attempting to do the short sale. If it doesn't go though then at least you tried. The credit hit on a foreclosure can be up to 250 points or more, and will stay on your record for around 7 years. If you need a security clearance in the future you will probably not be able to get one.
Regarding the listing agent bringing a buyer. If she does, then she would operate as a dual agent, and that dilutes her fiduciary duties to you, and the buyer.
There are inherent conflicts with dual agency. If she were to bring a buyer who is an investor, then the offer may be lower than your lenders would accept, and because she is a dual agent, at that point she cannot advise you on what to accept, without violating her duties. She also cannot advise the buyer.
Dual agency is still legal in AZ, but I won't be a dual agency because of the conflicts. It will probably be stopped within a few years.
To explain:
An agent owes the fiduciary duty to the client of:
Loyalty (complete loyalty to the client as the primary concern)
Obedience (of all lawful instructions)
Disclosure (of all material facts that would affect the price one would pay for a property)
Accounting (of all funds)
Confidentiality ( of all confidential information, but must disclose material facts to the other party)
Reasonable skill and care (Skills for the type of transaction the agent is undertaking)
If an agent represents both the buyer and the seller, there is an immediate conflict of Loyalty and Confidentiality.
Therefore, the agent must become Neutral. The agent cannot advise either party on pricing or negotiating strategy.
I acted as a dual agent one time several years ago because the buyer was very reasonable and wanted to make a full price offer. But after that I decided that I could never place myself in a position where I could not be completely loyal to the seller who hires me.
So I won't do dual agency anymore.
About being home during showings: It is usually best if the seller is not home because the buyers agent can ask questions to get information that will be used in the negotiating process. If the seller is not there it also allows the buyers to openly discuss the house without offending the owner.
In your case with the dog, my advice, if you were my client, would be to stay there with the dog; introduce yourself and tell the buyers agent that you will be out back, or in some room out of their way with the dog. And they can go through the house by themselves. If you're out back, that allows them to talk among themselves.
I hope the way I've written this makes sense and can be helpful to you in making decisions about your home.
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