Steve

$500K, or about $375s.f. with basically no lot, $300/month HOA dues, $500/month prop taxes + maintenance + insurance when you can rent comparables for $1750-$2K/month?

I think I'd pass. - Fri Nov 14 2008, 12:38

The only people who can accurately tell you impact on your credit score is Fair Isaac, who created FICO scoring and keeps the formula quite secret. Per their consumer site (myfico.com) there is effectively no difference in how they score a short sale versus alternatives (see link). I would suspect you'll take a hit on your credit, though most of the damage is likely already done via the string of 120-180 day past due records on there already.

As to when you can buy again, it's anyone's guess. I will say you're in good company as there's no shortage of people facing situations just like yours. And there are still far too many homes in the U.S., as will be the case for the foreseeable future. I would suspect a couple years down the road when the housing market bleeding has slowed mortgages will be issued less by virtue of a three-digit credit score rank with a 7-10 year memory, and more by a credit score reflecting two year's past performance, your debt and income/job history/stability.

Given the housing implosion continues onward, I would doubt you'll be able to secure a mortgage from anyone other that government-backed mortgage (too much risk for private entities, who can't sell mortgages at market rates due to crazy forced lending from government-sponsored competition) -- and I don't believe Fannie/Freddie is an option for you at the moment with a recent short sale. Rent in the short term, kill as much debt as you can and stockpile down payment cash the next couple years. You'll most likely be in a good position to buy a house at prices significantly lower prices in a couple years. - Wed Nov 12 2008, 13:08

Well sure Matthew... if you'll see an average 9% appreciation over the next 30 years, of course you should buy. Then again, somehow I doubt the extraordinary series of events that allowed that past performance will repeat itself again (small town region evolves into a tech center, heads into a dot-com bubble immediately followed by a housing bubble of unseen proportions).

Homes don't magically gain in value. It requires willing and capable buyers to appreciate. This area can't sustain these prices - that's obvious to anyone who bothers to think about it. I know there's wealth out there, but not the type of wealth required to keep that quantity of homes at those prices. Particularly given the evaporation of home equity and investments that just occurred. These aren't Bel Air mansions we're talking about, or the stuff over in Woodside. These are 20-year old 3Ks.f. homes on 1/4 acre lots trying to sell for $2.5M+. Anywhere else in the country these are viewed as nothing more than middle class homes.

I realize your job is to ensure transactions occur regardless of the outlook, but this is pretty basic economic stuff we're talking here. Suggesting a second 30-year period of 9% annual yields is comical. - Mon Nov 3 2008, 18:20

It's dropping because no one in their right mind pays $2million for a home they can rent for $6K or less.

Consider:

- $2M purchase
- $400K down (20%)
- 8% mortgage
- 0.5% annual maintenance
- 1.3% property tax

After three years, you'll have spent:
$380K in interest
... less $154K in tax "benefits" (first $1M, assume highest tax bracket @ 35%)
$78K property taxes
$30K maintenance
$50K loss of down payment investment yield (assume 4% after taxes on the $400K)

Total 'dead' money (does zero for equity) spent in three years totals $384K, and that doesn't include various home insurance costs and other fees. Nor 5%-6% fees in the event you have to sell.

That dead money equates to nearly $11K/month. Considering you can easily rent a comparable home for $4.5K-$6K per month, any rational home buyer runs from a deal like that. - Fri Oct 31 2008, 13:03

There's some bad info in this thread, particularly the 'help-me-shortsale' link.

Credit score impact is basically identical. Fannie Mae/Freddie Mac might allow you to get one of their backed mortgages sooner if a short sale however. - Thu Oct 30 2008, 09:09

The short story here is that a short sale will ding your credit score 80-120 points on average, a foreclosure 150-250 points, meaning you won't be buying anything for a long time.
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Per FICO themselves, there is no difference to your credit score between foreclosure, short sale or deed in lieu. See link.

Best I can tell the only difference between these options is the length of time one will have to wait before qualifying for a Fannie/Freddie-backed mortgage again. - Thu Oct 30 2008, 09:01