Is it wise to sell current home for a loss if you can buy a larger home undervalued by the same amount you are losing on the current home?

Asked by Open2c, 85242 Sun Jan 17, 2010

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Jeffrey Masi…, Agent, Scottsdale, AZ
Sun Jan 17, 2010
Dear Open:

Interesting question.

Without knowing any of the details, it woult seem to me that each investment needs to be looked at separately. The loss is a loss when you sell it. The larger home is a potential gain if your assessment of its current undervalue is correct and that it will stay at the same value or increase in the future.

The neighborhood, your use and love of the larger house, commute costs, extra taxes, maybe more utilities for the bigger house, extra homeowner fees, mortgage insurance, extra hazard insurance are all additional factors.

You may be better off hanging on and waiting for current home to improve.

Take a look at all of the numbers which it sounds like you are already doing.

Don't rule out a foreclosure property. This is a great time to buy. As you probably know, the $8,000 tax credit has been re-instated for first timers or those that have not owned in three years. There is now a $6,500 Tax credit for existing homeowners. Additionally if you do purchase a foreclosure property, free grant money (up to 22% of the purchase price) is available if you live in the home for periods of 5, 10, or 15 years. This makes inexpensive homes already, even more affordable. The free grant money is available through the state of Arizona. See the link for "Free Grant Money" at:

If I can answer any more questions or have one of our best agents show you some homes or land, feel free to give me a call. I would be pleased to help you.

Jeff Masich, Realtor®
Arizona Homes and Land
HomeSmart Real Estate
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Ron Hall, , Goodyear, AZ
Tue Jan 19, 2010
That is a lot to consider: Aside from all the investment, tax, emotional, and expense considerations there may not be a choice depending on your financial situation. FHA, FNMA, & FHLMC all have very specific guidelines and requirements in order to finance an additional property. Here is exerts from HUD and the mortgagee letter that specifically address's this issue


It literally states

"Due to FHA’s concern that some homebuyers in these transactions may attempt to provide misleading information regarding the rental income of the property being vacated to qualify for the new mortgage, FHA is instituting underwriting guidance designed to assure that the homebuyer can make payments on the full debt service of both mortgages. "

Its a lot to consider I hope this helps.

Ron Hall
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Joan Braunsc…, , Morris County, NJ
Sun Jan 17, 2010
This is where just taking a pencil to paper can become invaluable.
Part of the problem is you are dealing with a bunch of unknowns: what you can actually sell your house for (minus realtor fees, taxes, mortgage owed,etc.) and what you can actually buy a house for (adding closing costs, moving expenses, higher upkeep/taxes for larger house, etc.).
The ONLY thing at this point you know is how much you owe on your current house and what your current living expenses are.
Do as much research as you can on current market prices, factor in the worst case scenario(such as the least amount you think you can get for your house) and see if it still works in your favor.
It obviously all comes down to what you can do as well as what you want to do.
Looking back over my answer, I doubt I told you anything you don't already know.
It might be wise to do some research, start writing some numbers down and approach a loan officer to talk about specific numbers.
I apologize for rambling and I hope this wasn't a complete waste of your time.
Good luck with whatever you decide to do.
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