So, you need to sell your house? Okay, maybe you don't NEED to sell, but maybe you want to sell. For whatever reason, you're selling - because of a job opportunity resulting in relocation, a divorce, a lifestyle change, your retiring or perhaps getting remarried. But, wait. What happens if you owe the bank more than what a buyer is willing to pay? Do you wait to sell? Why put your life on hold and be miserable?
To sell, do you NEED to get X number of dollars just to break even on what you owe the lender?
Of course if you sell below the loan amount, you'll have to pay your lender out of pocket at closing. It's called negative equity. Even if you aren't in a negative equity situation, you still need to pay the fees and expenses associated with selling your house. So, you're crunching the numbers and things just aren't adding up. It looks like you will not have proceeds left from the sale to pay the expenses associated with selling (transfer tax, broker & attorney fees). You might not even break even. Now what?
Go ahead, apply pressure. Just tell your Realtor you NEED X number of dollars - and, to work his or her magic. But, your Realtor is telling you that a buyer does not want to pay X number of dollars in this market. Don't shoot the messenger. Your Realtor will probably not be able to pull a rabbit out of a hat. It's the market, not your agent. You need to give consideration to what other homes are selling for, how many other properties you are competing with ...and, you have to understand that in order to sell - what you REALLY NEED is to price your house competitively.
What you NEED - might not be what a buyer is willing to pay.
This might seem a little insensitive, but a buyer really does not care what you OWE. So, now what do you do? Put your plans on hold? Postpone your life as you want it to be? Perhaps there is a solution. But, you have to WANT or NEED to sell bad enough. Just how motivated are you? Are you motivated enough to take a loss? What - you don't think you are in a position to do so? Think again.
Can you be creative?
Do you have other investments? Do you have money set aside in a savings account? Is there a retirement account you might be able to tap into early? Do you own stock? As a Realtor, I once had to be creative and daring enough to tell my unemployed single homeowner that he should probably sell the Mercedes that was sitting under cover in his carport because it was January and he only drove his winter rat during the snowy months to keep his trophy car in mint condition.
A few months ago, another seller who had his house on the market way too long, came to me and told me his strategy for dealing with his negative equity situation. There were no assets but he had great credit. He was financially strapped. The only way out of the mess was to sell at a loss and use his good credit to apply for a loan which would pay off the negative credit at closing. The monthly payment on a $25,000 loan was a small fraction of what he continued to pay each month for this vacant house. Don't have good credit to be able to implement this strategy? How about borrowing from a family member?
Can you borrow from Peter, to pay Paul?
Let's face it - by now, everybody has lost money in every market. Real estate was just the first market to be hit in this national economic disaster. But, those caught with negative equity who placed all their eggs in one basket (their personal residence) are feeling it the hardest. It's like being placed under house arrest as one blogger describes it. Judy Chapman, REALTOR® ~ Short Sales / Luxury & Lake Properties (Coldwell Banker Residential Real Estate) summed it up so eloquently when she wrote a post titled Homeowners Under House Arrest - it's a sad but true dilemma.
In Judy's post, broker Bryant Tutas Broker/REALTOR(R) Tutas Towne Realty, Inc explains from personal experience how sometimes there is money that can be paid at closing when one has to take a loss on sale. Yes, sometimes we have to cut our losses to be able to move on. Sometimes we even have to be creative. Unfortunately, not everybody is positioned financially to do this because the one and only investment is - THEIR HOUSE. No money in the bank, poor credit, no rich uncle.
Can you rent that property? Perhaps you might need to become a landlord to be able to move on.
When, there are no options the homeowner and the home are like a ball and chain. There's resentment and the house becomes an unhappy place.
While more and more people are finding that putting their eggs all in one basket is a very poor investment strategy, others are realizing that there are options. They've found solutions. And, those buying homes today are hopefully learning that it's okay to live modestly to be able to save wisely for the future. Perhaps it's a lesson learned too late for many. But, I sure hope most of us can learn from mistakes made in the past.
Nobody should feel like a prisoner in their own home?
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