Q: In 2011, has the already distressed real estate market slowed down even more?
A: No. Short sales (which most banks are now recommending) have gone up and foreclosures have gone down.
Q: When I can buy a home again after I short sell?
A: Federal guidelines allow consumers to buy three years after a short sale (two years for veterans). You would be surprised at how fast two or three years fly by when you’re stuck in a bad loan.
Q: Is short selling right for me?
A: Short selling might seem like a painful decision at first, but three years is a relatively short time to start fresh versus living inside the results of a 30-year bad financial decision.
Q: Short selling falls under the protection of Mortgage Debt Forgiveness Act. How does this protect me?
A: The Mortgage Debt Forgiveness Act allows primary residence homeowners to pursue a short sale and have their total debt forgiven. Consult your accountant for a complete explanation.
Q: What is HAFA short sale 100 percent debt forgiveness and how do I qualify?
A: HAFA short sale is a government bailout program for homeowners. When primary residence homeowners list their properties for short sale, their lien holders will immediately start the process to qualify them for HAFA 100 percent debt forgiveness. Lien holders will explain fully how the procedure works once the property is listed. Generally, homeowners receive 100 percent debt forgiveness and a $3,000 move-out incentive on the day the short sale closes.
Q: Is President Obama coming through to bail out homeowners with loan modifications?
A: So far, the Obama administration has not provided funds necessary for loan modifications to the banks.
Q: Can homeowners qualify for loan modifications on their own?
A: Yes, but if a homeowner cannot afford a 30-year fixed loan, why would they want to drag it out to a 35-year or a 40-year loan?
Q: How much is my original $250,000 loan worth today?
A: Most home values have sustained a 50 percent loss in Reno/Sparks, so your $250,000 loan is typically worth $125,000 fair market value. It is much less in some areas such as Cold Springs, Fernley and Fallon.
During my initial consultation with homeowners, I point out that they will be paying a minimum of $648,000 for a $125,00 fair market value home. Also, factor in improvements, repairs, insurance and HOA dues to this $648,000 total repayment; let’s add a minimum of 3K a year for 30 years for a grand total of 738K. Now subtract the current market value of 125K from 738K and this homeowner will have overpaid the bank by 613K.
Q: What is the difference between investing in a savings account for 30 years and a 30-year real estate investment?
A: Even with a meager 1 percent return, your principal investment will not disappear in a savings account. Not so in a real estate investment. Your principal investment can be deflated by the current market value. When a homeowner sells in 30 years, he can lose between 50 and 75 percent of his principal investment.
Moral: Short sell now or short sell 30 years from now after you lose even more of your hard-earned money.
Q: A million dollar question: When will the economy recover?
A: Believe it or not, the economy is recovering slowly every day. You do not need to be an economist to see that we need a minimum of two things to happen in order to see a successful recovery in our area:
1) Low unemployment rate and
2) The state of Nevada offering employer incentives to relocate to northern Nevada.
I hope these answers give you some clarity and, if you are stuck in a bad loan, help you make an informed decision. In the case of a short sale, getting out from under water and waiting three years to buy another home might be the wisest move you can make for your family. But at the end of the day, it is your decision whether or not to short sell your house.
Annie Christian is a real estate broker and owner of The Annie Christian Real Estate Group. She helps with everything from buying and selling to foreclosure and short sale. To submit a question, call 351-5117. Her website is www.anniechristian.com.