Home Selling in 85364>Question Details

Lauri, Home Seller in Yuma, AZ

What is a quick home sale?

Asked by Lauri, Yuma, AZ Mon May 26, 2008

Home has been on the market for over 1 year. Price has been reduced to what we owe on our loan. At this point we have to borrow to pay our Realtor. Realtor has suggested quick home sale or lease, however, house payment is $2800 per month. We are on an Interest only loan, 1st & 2nd mortgage. House payment is a struggle every month. We have worked too hard and long to lose our credit, any suggestions?

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Lauri
There are a couple of options you might want to consider, however regardless you should discuss your situation with a Realtor that knows the local market and can provide you with some advice based on your personal situation.

First, every home will sell at a price. Your problem is that you have been chasing the market. The market values are dropping, but the list price of your home is behind, so your home has always been overpriced compared to the market. A way to verify this is to ask your Realtor how many homes, like yours, have sold during the past year?
Second, you need to be honest with your Realtor about why you are selling in the first place. Just reading your post, it appears that you are selling because you cannot afford the monthly payments, is that correct? You are not selling because you have to relocate for a new job, or you probably would have lowered the price enough to get the home sold.

Selling because you cannot afford to make the payments offers a couple of options:
a) If your income is not expected to change, (say one spouse has lost their job, but is going to find a new job), then you should approach your lenders and ask them if they will consider re-structuring your loans.

Most lenders do not want to foreclose. They also would prefer not to have you sell the property for less than you owe. Both of these options are going to cost them a lot of money, so the least costly option is for the lender to modify the terms of your loans so you can afford to remain in the home.

Generally speaking, you can make a case for a loan modification by writing a letter to the lenders, outlinging your finances (a financial statement of your income, your monthly expenses, copies of pay stubs and bank account statements) so they can see your situation. Then, also explain how you got into this situation and what you want them to do. (for example, we need you to find a way to lower our monthly mortgage payments from $2800 a month to $2500 a month.

b) the other option, if the lenders will not modify your loan, is to sell the property. In that event, the same p[procedure is followed. Your Realtor asks for a short sale package, they will submit your information to the lenders, and then hopefully they will approve the sale.

c) One of the big problems right now is that homes are declining in value, so home owners that initially were not in trouble, now find themselves in trouble because the homes that have been foreclosed drag down the values of the other homes. So while your Realtor is trying to get the lenders to accept a low price for the sale of your home, the value of the home is declining.

As long as you make the payments you are fine, however if you decide that you cannot make those payments, then the foreclosure process starts. It is a race against time, because if the lenders cannot agree to sell your home for a lower price, eventually it will be sold at a trustee's sale.

So from your perspective a foreclosure is a big ding on your credit. A short sale is a smaller ding, and a good Realtor can help you negotiate the end result to read "settled" or "paid in full" so the damage to your credit is minimized. However, to get a lender ot agree to a short sale you need to prove that you are unable to pay your bills, so your credit will be damaged to some degree anyway.

The best hope is for a loan modification, assuming that you want to stay in the home if you can.

Good luck!
1 vote Thank Flag Link Tue May 27, 2008
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
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The price has been reduced to what you owe on the loan, but does that mean the price is equal to the current market? In many areas in Arizona, those are two different figures - particularly if you've purchased in the last couple of years.

There's no such thing as a "quick sale" ... best guess is your agent means a short sale, which is an option when you owe more on your home than it's currently work. It will impact your credit but generally not as much as a foreclosure.

Don't waste the call on the "I Buy Ugly Houses" kinda folks, not unless you're looking to sell your home for 70 cents on the dollar compared to current market value - not your current loan amount.
1 vote Thank Flag Link Tue May 27, 2008
Lauri,

Based on what you've indicated in your question, if the payments are a struggle every month and you cannot lease the home for something equivalent to the payments, then leasing it would probably be more of a struggle. The tax breaks you might get for leasing it and declaring it investment property are primarily depreciation and the benefit there comes when you file your taxes for the year. Occassionally, if you have a job, you can try to account for the increase in your tax refund now by increasing the number of deductions on your W4, but that's sometimes tricky.

Have you approached the mortgage holders for your loans to discuss the situation with them? If you're current on your payments, occassionally you can get something worked out. I've actually had a few past clients get 30 to 90 day deferrments on their payments, during which time they sold their homes. The interest continues to increase the principle balance, but it helps to ease the monthly burden.

I'd be wary of the "quick sale" if it's in line with other schemes I've seen to try to take property off an owner's hands. Some offer to buy your home and rent it back to you, allowing you to continue to try to sell it, or take it back at some point in the future.

Not to knock your current agent, but have you had the same agency listing your home for a whole year? Or have you tried different agencies? Sometimes a fresh look can make all the difference in the world. It's also amazing how things seem to move faster when someone sees the possibility that a relationship is going to end without any results.

Lastly, to at least eliminate some of the realtor fees, consider calling one of the companies who regularly buy homes in volume, like "We buy ugly houses". They're not just there to buy distressed properties, they buy all kinds of property, and may have a way to make something amenable work out. In some situations, they don't take the buyer's commission, which can reduce your total commission picture in half, if you work out a deal with your listing agent.

Tough situation, but good luck,

Jeffrey
1 vote Thank Flag Link Mon May 26, 2008
Your Realtor is probably suggesting a "short sale". A short sale is when you sell the home for less than what you owe the bank. You would want to talk to your lender about this option.

Good luck.
1 vote Thank Flag Link Mon May 26, 2008
I would take a look at taking a negative monthly cash flow and renting it out. There are tax advantages when you put it up as a rental. Perhaps wait six months to 2 years and see how things look then.
Credit is really tight now, so it is hurting a lot of potential buyers.
0 votes Thank Flag Link Mon May 26, 2008
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