What's a Homeowner To Do?
This agent is one smart lady for referring the buyer to a tax attorney to avoid being liable for a costly decision. Renting may be a good move and so might a short sale. But letting an attorney point out the benefits and deficits is the realm of a qualified legal expert.
Too often I hear agent friends of mine advising sellers on whether or not to do a short sale, foreclosure, etc. Not this boy! Let the legal eagles have that one. My job will be to sell the home if that is what the seller decides to do after getting "expert" advice.
I recently went on a listing presentation where I knew the seller had negative equity. When I arrived, I got the customary tour and received a detailed list of property upgrades. I asked the seller the typical questions: how many loans to you have; what are the balances; monthly payments etc. I could tell he was hoping that I would tell him that I am a miracle worker and can sell the home at a break-even point.
It turns out that he owes approximately $79,000 more than the property is worth. He has some relocation benefits but not nearly enough to make up this delta. We discussed the short sale option. He doesn't want to destroy his credit. He mentioned "letting it go." I cringed as I don't want to be party to anything resembling a strategic default. For him, a foreclosure and the credit damage that would follow, could jeopardize his security clearance with the US Government. Without the security clearance, he can't do his job. We also discussed Loan Modification. He tried that......DENIED! He makes too much money! His relocation package offers a "buy out" option. They will buy the property from him at market value. That won't work either unless he can make up the difference.
OK, so here we have a responsible person with a job transfer, great credit, bright future and a house he can't sell. Well, the house would sell but not without destroying his job. So what's left? Carefully, yet swiftly, I told him that becoming a landlord might be his best option. Rents are around $1100 per month. The monthly expense with mortgages and HOA is just shy of $1500 per month. He would have to feed his mortgage $400 a month to keep his credit in tact. $400 is a lot of money and could be the answer for him.
His relocation benefits are good for four years. There is know way of knowing what four years will bring. Will the market turn around? Will the prediction hyper inflation take hold and drive interest rates through the roof? He maybe faced with the same issues then that he is now.
I referred him to a tax attorney so he can get education on the amazing tax benefits of being a landlord and possible tax liabilities if he ends up doing a short sale.
This gentleman has a lot to think about before making a decision. It won't be an easy one.
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