As a college kid in the eighties I loved the Clash. Should I stay or should I go now… A lot can be learned from the poets and the artists of the world… If I go there will be trouble, if I stay it will be double… even when those poets are teeth missing, tattoo covered British punks… This indecision’s bugging me...
Indecision; confusion; so much to think about… So it is with real estate these days. Recently I have become the steward of the “Accidental Landlord”. This is the homeowner who wants or has to move, either out of economic necessity or employer requirement (transferring), or just out of the desire to take advantage of the incredible buying opportunities today.
I did a listing presentation last week, in which the owner, a former high level executive for local company, wanted to sell his home. He had pulled the equity out when a new job came up and bought another home in that city. His family was finally ready to join him with kids graduating etc. This meant it was time to sell his old home and he came to me. I had to tell him that his home was no longer worth enough money for him to sell and cover the loan and costs. Therefore one of two things had to happen. Either he would have to do a short sale, where the bank has to approve the shortage, or he would have to put in money to pay off the lender and cover the selling costs.
The short sale approach would likely require missing many payments and undoubtedly damage his credit. I instructed him, that in my opinion, this was a bad strategy. Aside from the credit damage incurred, I didn’t think he’d qualify. Qualify? That’s right, qualify. If a seller has assets, a good job and no real hardship, why would a bank let them off the hook for the shortage? The answer is they won’t. I offered this perspective: you borrowed money to purchase a home after you relocated and now you have to pay back that loan. Logical, yes, comforting, no.
Tomorrow (part 2 of 2): So what’s a seller like this to do?