Reason Number 1 – Because You Can!
Several years ago short sales were unheard of. Asking a bank to do a short sale would have resulted in a laugh and a click at the other end of the phone. But banks now realize the scope of the problem. Heck, even they needed a bail out. And you may too! Do you want to be the guy taking all the arrows and holding up the weight of the universe like Charles Atlas, or does it make sense to restructure now while you can. I guarantee when all of this mess is over, if you have not taken advantage of the tools the government has given you right now, you will be too late. If your payment is too high, and your property is severely upside down, procrastination is your biggest enemy. We have had a 100% success rate helping our clients dig themselves out of the whole (and most of the time our services are free!)
Reason 2 – Keeping this House is Going to Bankrupt your Retirement
If you find yourself -$50k, -$100k, -$200k upside down on your homes value, I have news for you. It is probably going to take 10 to 20 years just to dig yourself out of that hole and get to break even (that’s zero on the wealth scale). Yeah, yeah, yeah, I know property values will come up again. But lets face it, they are not going to do what they did before! How can I be so sure of that? Am I just being cocky? Well think about it. Its common sense. If they do what they did before, then we will be back in this mess again. The whole point is that they were giving loans to people who didn’t qualify and creating artificial demand and speculation. (The banks, government and consumer greed conspired to drive up the price to unrealistic and unsustainable levels) Don’t count on that happening again in your life time. At a normal appreciate rate of 3 to 7 percent per year, its going to take you a long time to dig out. Hope you want to be in that house a long time and don’t mind being broke. No I am not a heartless *****. But somebody has to level with you. I have talked to many people in denial that just want to do the easy thing and do nothing? Wow, that is an irresponsible way to plan your future. Can you really afford to do nothing? Remember, those who fail to plan, plan to fail. A short sale plan that works can catapult you financially 10 to 15 years ahead!
Reason 3 – Your payment is way to High for your income and for the house you are in!
During the boom people were buying real estate they could not afford. Banks let people go to 57% of their total income on their house payments. Even worse, Alt A loans let people over state their income. That was like putting the fox in charge of the hen house. All with the promise that real estate values would go up for ever. Wrong!
A manageable payment should be between 28% to 35% of your total income for your house payment. If you are higher than that, then you are house poor. Now that Orange County real estate is on sale, its a good time to recalibrate your payment. It would be a lot better to own more Orange County homes for less money. Its just common sense.
Reason 4 – You can own a new Orange County home in as little as 2 years from short selling your current home
Fannie Mae guidelines state that if you short sale a home you can qualify for another Fannie Mae loan in as little as 2 years. And there are so many deals around that you could probably lease to own or do creative financing much earlier. So just because you short sale, doesn’t mean you can’t own. This is in stark contrast to foreclosure. Foreclosure will mark your record and block you for 5 to 7 years according to sources. I don’t know anybody that wants to sell a home to someone with foreclosure on their record. So don’t let that happen to you! We are talking about the difference between a D and an F on your credit report. Its a lot easier to rehabilitate a D.
Reason 5 – President Bush gave you a huge tax break you are not taking advantage of “The Mortgage Forgiveness Debt Relief Act and Debt Cancellation“
Normally when you short sale or foreclose on a home, you are obligated to pay tax on the debt relief. That means that if you are forgiven $100k, you might owe as much as $25k in taxes. Wow that really stinks right? I mean, you are broke, and you just lost your home, and then the government is going to come and take your future earnings? Not between 2007 to 2012. Under this act, if you occupy your home as your primary residence and your short sale your home, you are forgiven. That is right, you do not owe any tax. (see the IRS website link for specific rules and regulations and consult with your CPA) There is a form f982 that your CPA needs to file, and this is a huge tax break for many distressed owner occupant home owners. It is a gift from uncle Sam worth tens of thousands of dollars. Sweet!
Reason 6 – Loan modification is a temporary fix for most people.
9 out of 10 of the loan modification packages that I have seen are 5 year deals that revert back to the borrowers original terms at expiration. For most people their loan will spike again in 2013. Guess what, the tax break above expires in 2012. Don’t miss your chance to get out from under it! Its very possible that delaying a short sale (or worse case foreclosure) could cost you $25k to $50k in taxes. Ouch! Well that seems really silly right. If you don’t plan to own that home for 10 to 16 years, then you better get out now while you can.
Reason 7 – You don’t have to trash your credit to short sale your home
One of the biggest objection I get to short selling a home is that people don’t want to ruin their credit. Good point. And you don’t have to. I am not saying that it wont affect you at all. It will negatively affect you. But if you follow the link in reason 4 above, About.com will explain to your that it is mortgage lates that hurt your credit the most. You don’t have to be late to request a short sale. This is especially true if you have a loan from a lender that accepted TARP money. (That is the federal bail out money given to banks. ) Their guidelines state specifically that people don’t have to be in default to request assistance. Furthermore, you can pay all of your other bills. I have talked to many credit repair people that claim they can bring a score back up into the mid 650 range within 6 months of a short sale. That’s not bad. (note that individual results vary, please consult a credit expert)
Reason 8 – You may not have to pay any fees or commissions to sell!
Normally, if you sell a home you may pay as much as 7% of the sales price in costs. That typically results in $35,000 in cost of sale that comes out of your pocket (for an average $500k home). But in a short sale, it comes out of the banks nets proceeds. So in effect, the bank is paying for the cost of sale. Furthermore, my company offers a guarantee. In the event the bank is not cooperative and we are not successful in short selling your home, you owe us nothing. So you have nothing to lose and financial freedom to gain.
This is a challenging time for most home owners. But all of the doors are open. You just need to walk through them. The government has done everything it needs to to help you take the steps to fixing your situation. Contact me for a personal interview at no charge. Its Free. We can discuss your options and you can decide which is best for you.
While I realize that may people are not proactive about their future, this article is a plea to help people who really care and want to fix their housing and payment problem. Call me now so I can help. We have had a 100% success rate in helping our clients fix their future.
