You Should Know Housing Market News Still Stinks More Short Sales on Horizon
Zillow published the latest housing news, and it isn’t good. Zillow’s cheapest maximum online latest Real Estate Market Report says U.S. home values fell another 9.9% in quarter 2, compared with the same quarter last year.
Homeowners appear to be in denial. About 62% of homeowners believe their home values have increased, while, in fact, 77% of U.S. homes have declined in value in the last year.
Of course, each market is different. There are parts of the country that have gone up in value, slightly. But most people, if they find they need to move, will be in for a shock. Unless there is some built-in equity, homeowners will be coming to the closing table with cash or asking lenders to accept short sales in lieu of full payment upon sale.
To argue the need for a short sale you’ll need to show hardship or inability to pay, and a necessity to sell. Most lenders will cooperate on a short sale given a sufficient homeowner’s need.
Some lenders will not consider a short sale unless the homeowner has demonstrated need by becoming behind on payments, which has always seemed to me to be antiquated, wasteful, and time-consuming. Why not solve a problem before it gets out of hand?
If you’re in that situation where you know you cannot keep your home, and the value has fallen below your mortgage level, put in a call to the Loss Mitigation Department of your lender and check out your options. Sometimes you’ll get a better response if you work with an investor, Realtor, or mortgage broker who has experience at working out short sales.
They often already have relationships established with loss mitigates in many lending institutions and can cut through the red tape for you. They will often also help you find an end buyer to get you out from under a bad situation.
A short sale is always a better option than a foreclosure because there is much less damage done to the credit rating and the balance of the loan is forgiven. While normally there is a tax consequence for the forgiven portion of the loan, as part of the bailout program the government is temporarily halting taxing unrealized capital gains for primary residences sold in the short sale. The same, unfortunately, is not true for second homes and investment properties.