You are in the same situation that so many others are in at this time. Because there is no clearly beneficial direction for you to take the best course is unclear. To make matters worse, the state of the national and world economy is not encouraging.
The question becomes, if you try to wait it out, will this save you money or will you lose even more? We would like to be able to say, if you hold on for 6 month, or 18 months, etc. you will still be able to sell this unit for the same price you are considering today.
Unfortunately, with the situation as it is, we are expecting prices to continue to decline. So you unit's value decreases more and the bleeding continues to intensify because of the monthly expenses.
The picture as we see it is, lose now or wait and lose more later because the recovery period for today's losses may be years away. There is no clear ans easy path......the best route is the one that meets your personal needs for TODAY.
The Eckler Team
I couldn't answer your question any better than the ones you've already received. I will, however, add my own personal good luck wishes to you. Times certainly are tough for many and whatever one can due to reduce stress one should do.
Deciding what to do is based on your financial tolerance. In time, all oceanfront properties will return to value. If your pockets were deep and you can comfortably wait it out for who knows how long that might be the way to go. If you are working to cover your expenses, cutting your losses and being done with it may be your better choice. Some of my clients are cutting their losses and then turning around and buying something else that is a really great deal making up for their losses. Good Luck with your decision.
Steven A. Schnitzer email@example.com
Licensed Real Estate and Insurance Professional
I would agree that it is ultimately a matter of your personal situation and capacity, however, I believe South Florida and South Palm Beach are a bit more of a niche market than our west coast colleauges. We have a significant amount of activity in our Palm Beach office these days with investors coming in and buying for cash. There are investors from many other countries buying Palm Beach real estate. I don't agree it is a lose now or lose later option. It is more an opportunity to get creative and figure out how to cash flow, trade or exit gracefully. Feel free to contact me if I can be of assistance or share more with you. I welcome a conversation.
â€œFannie Mae buys loans from mortgage originators, repackages the loans as mortgage-backed securities, and sells them to investors in the secondary mortgage market with a guarantee that principal and interest payments will be passed through to the investor in a timely manner. Also, Fannie Mae may hold the purchased mortgages for its own portfolio. By purchasing the mortgages, Fannie Mae and Freddie Mac provide banks and other financial institutions with fresh money to make new loans. This gives the United States housing and credit markets flexibility and liquidity.â€
â€œIn order for Fannie Mae to provide its guarantee to mortgage-backed securities it issues, it sets the guidelines for the loans that it will accept for purchase, called "conforming" loans.â€
This is a key element of what Fannie Mae does. â€œAs of 2008, Fannie Mae and the Federal Home Loan Mortgage Corporation (Freddie Mac) owned or guaranteed about half of the U.S.'s $12 trillion mortgage market.â€
Because they are setting the guidelines for 50% of mortgages their guidelines and announcements are extremely important and very relevant.
I have heard this from multiple lenders...
Fannie Mae is the last source of news I will trust - as a Mortgage Broker, I am seeing the banks tighten up day by day. Lenders are increasingly tough...but a Short Sale is going to be a BIG issue
In essence, you are going to a lender and telling them - sorry but I can't pay you the money I promised you I would pay so just go take what you can get and let me off scot-free...
if someone borrowed $1000 from you and told you they could only pay you $400 and you had to get it from someone else, you'd be mad too
Right now it has NOTHING to do with Fannie Mae and everything to do with Credit Bureau Reporting... right now, credit history is what matters to lenders...but don't be fooled that FHA will ever consider someone who has short sold a home for at least 4-5 years.
Equifax, Experian and Transunion ALL count a Short Sale with the same weight on your credit as a foreclosure.
In a foreclosure, there is a 2 year period during which you reestablish credit as well.... so do bankruptsy.. you have to TRY to fix your problems and get new credit established.
That is just not true. On June 25, 2008, FannieMae made an announcement outlining their new guidelines regarding a short sale.
"Due to the increased incidence of preforeclosure sales, Fannie Mae is establishing a 2 year elapsed time period for reestablishing credit following completion of the action." This is only one of many possible benefits of completing a short sale.
The successful completion of a short sale has tremendous benefits to the homeowner, especially in the case of a primary residence. It is important to seek the help of a professional when facing such an important decision. Good luck, and know that you are not alone.
Here s the link to the guideline changes from Fannie:
You didn't say how much you loose each month with it rented. For example, lets say you lose $3000. a month. If you divide the lose if sold today, $250,000. by the monthly lose of $3000. per month, =83.3 months to equal your lose selling today. Of course, you would have 1 less headache.
Hold on if you can!
If you cannot cover your expenses, then that is another situation altogether. You need to figure out the financial damage you are doing with negative rental cash flow. If you're a few thousand upside down each month, then how long does it take to get to the $250K loss and can you afford it for a while??
The market will bounce back... to get to the 2005 levels will take many years - but if it bankrupts you in the meantime then the short term (but significant) loss may be better than the long term damage it could cause
on the flip-side... many investors that bought 2005-2006 are 1) selling at a loss and rebuying - or 2) buying a 2nd unit and cost-averaging the units.
1) now that you can get the unit as low as they are now, you can get on the front end of the appreciation curve in a unit (or two) with possibly better cash flows - something that gets a higher rent at a lower cost. For instance, I showed an investor properties in Highland Beach Club... for overall prestige getting one unit at $600K on a high floor gets the best resale value due to the view...but getting two units on the first floor with a restricted at $350K each will likely cash flow better
2) buying a 2nd unit - there was a luxury condo project in downtown West Palm Beach called the Edge. One buyer bought pre-construction in the $600K range... he bought another unit at auction recently for $200s and now he figures he owns two $400K units...
I would think twice if you are letting it short sell though... that is a permanent black mark on your credit. The effects of a short sale are just like a foreclosure - 250 +/- points and 5-7 years of recovery. The overall cost of credit in the future is unknown - but from past history - it could cost you well over $250K in higher interest costs on credit cards, car loans and mortgages!
Boca Executive Realty
The other answers you received say it all. It depends on the financial state. Eventually oceanfront properties will regain their value. It's a niche market and yes it did get hurt but not as much as off the island. There saying another year before we have a turn around. In the meantime look at what it is costing you if you hold on to it. Because you bought for investment it may be better yo unload now and make up the difference in another property. You are lucky you have a buyer. Condos are sitting for a long time on the market