New rules make short sales very attractive to the homeowner:
You still lose your house, but you have no tax liability on the forgiven debt (till 2012, and on your main home), and you can repurchase relatively soon. A short sale (unless you live in one of those areas of the country that didn’t go down in value) will free you from immense amounts of debt. Unfortunately, the lenders have not yet “come to the party” on the loan modifications they OUGHT to do, and STILL will not properly reduce principal so that you can keep your home, start making payments at the reduced rate, and get on with your life. So the next best thing is the short sale. The Feds (through their HAFA program) now provide incentives to both to you and the lenders if they will allow short sales.
A recent article in CNN Money.com (March 29) details the new benefits of short sales:
“on April 5, lenders and mortgage investors will have even more incentives to offer troubled borrowers short sales instead of foreclosing.
Under the new Home Affordable Foreclosure Alternatives program, borrowers will earn a $3,000 “relocation incentive” and servicers will get $1,500 for handling a short sale.
The investors who actually own the mortgage notes will get $2,000 in exchange for sharing proceeds of the short sales with any second-lien holders. And, finally, those second lien holders will receive up to $6,000 for releasing their claims.
Lenders participating in the program must also determine the market values of properties early on and inform the owners of just what price they’re willing to accept. Then, if owners come back to the lenders with bonafide offers, they have to be accepted within 10 days.”
The main benefits, though, of the short sale are different than everyone is saying. Here’s the point. If you stay in a home that has declined in value, you wind up paying not only the extra principal on that home, but the interest as well. Here’s how it works:
Suppose you live in a house that WAS worth $500,000, but is now worth $300,000 (pretty close to reality in my area), and that you refinanced it up to the maximum amount (many did). Over the life of your loan, you will pay $1,022,000 in total payments. IF your house is now worth $300,000, and IF someone buys that house, HE will pay $613,000 over the life of his loan. So you would pay $409,000 more to stay in that house than its new buyer will pay (at 5.5% interest) to buy it and pay it off. And that’s only your principal and interest. there are also additional taxes and insurance on top of that, and although these will eventually reflect the homes’ new and true value, they may not now. Finally, there is the little matter of appreciation. The next 30 years of real estate ownership will likely see some appreciation; if that is only 3% annually, a home purchased for $300,000 today could be worth $737,000 then. so not only do you have to pay $400,000 more, you lose about $200,000 in appreciation from the purchase point. So now your total loss comes to about $600,000. Not so good, when you do the numbers.
If I were to take $600,000 out of your pocket today, how would you feel? If I were to put $600,000 IN your pocket today, how would you feel? Well, I am offering you hundreds of thousands of dollars, if you will take my advice and do that short sale. I will be happy to work with you if you live in San Diego county.
There’s no charge to talk to me, and I will help you all I can.
Call me at 619-316-8781 or email me at
bradleyrealestate@gmail.com
Steven C. Bradley, Broker, CA Dept of Real Estate Lic. #00869762
