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Renting vs. Selling at a loss

By
Real Estate Agent with Keller Williams Realty TN R.E. License 292369

I have come across this about three times in the past week alone.  People who can make their mortgage payment but have to sell for one reason or another and are upside down.  They own more than they can get for the house and could not under the best circumstances sell without writing a substantial check to the bank to cover the loss.  

The first instinct goes to short sale.  That is selling for less than is owed and getting the lender to accept the loss.  We have seen more and more of this lately as an option to foreclosure.  

Is that the best option for the sellers?  Suppose the the house could be rented for more than what would cover their expenses, as is often the case.  Suppose the owner(s) are willing to try their hand at being a landlord?  Then, why not lease it out?  If they are not drowning in payments, and can find a tenant that can pay rent to cover the expenses, isn't this the best scenario for them?  

After a year or two or three of leasing it out, the market might be better for them to sell.  They will have that many more years of equity paid on their loan (by their tenants), and they will have had the advantage of being able to depreciate some of their expenses as they go.  They may even decide they like it (being a landlord).  They could actually make a little "extra" money renting it out.  They could go from being financially trapped to real estate investor.  When their fortunes turn around they could decide they need a few more "investment" properties.  

This may not be for everybody and each situation has its own circumstances that have to be weighed.  But often we can take the lemons life offers us, and open up a lemon aid stand.

What do you think?

 

Posted by

Franklin TN, Brentwood TN and Nashville Tennessee Real Estate

 
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9175 Carothers Pkwy, Ste 110 | Franklin, TN 37067 | 615-778-1818
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Comments (2)

Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Haven Express @ Keller Williams Arizona Realty

In our area renting out the house and being able to cover the expenses is extremely rare.  Short Sale is a better option than Foreclosure.

Jul 16, 2010 09:07 AM
Julie McLeland
BENCHMARK - Brentwood, TN

Rent it. Short sales dramatically impact credit scores. I would rather rent for a couple of years and be able to buy a decent home once the market recovers.

Jul 19, 2010 04:49 AM