Selling in an Upside Down Market

If you absolutely have to sell now, here's some tips for selling in an upside down market.

There are millions of people whom bought at the height of the housing boom. This means they bought at over inflated prices. Whether they have a 30 yrs fixed, or ARM payment or their mortgage is getting ready to adjust, it is little comfort that their house could very well be worth 50% of what they bought it for. Ouch!

(If this is your scenario) You just purchased your home in the last couple of years, and you will not be able to make the higher monthly payments. Perhaps, you may want to first speak to your lender about re-financing (if you have enough equity) or a rate freeze.

But, if you have no options and you have to sell less than what you actually owe: discuss with your lender or bank the option of a short sale. Chances are your house has gone down in value based on the current market conditions, not even taking into consideration the closing costs you had to dole out.

Short sale sellers need to be careful because there is no free lunch. The seller may end up with taxable income in the amount of the debt that is forgiven. The seller may also end up with adverse entries in their credit history.

Any property owner considering a short sale needs to seek the advice of a tax adviser. If the homeowner does not have to sell, or does not want to sell their home, there are some options available to homeowners. They could move into a more affordable home and rent out their existing home, they could take on a roommate,

• You can list your house for sale with a real estate agent, providing you have enough equity to pay the commission and the closing costs. See example, below.
  
• When it's a buyers' market, time is of the essence, and the longer a house sits, the less it will eventually sell for. If you are behind in payments, contact your lender, do not do nothing.


• Especially if you have a high-quality property, don't be afraid to sandbag the listing price.


• Chances are the money you lose here will be less than if you listed it higher and eventually reduced the price.


• I know of a home on the market in QAC that was listed at $450,000 one year ago, and the seller changed Realtors, dropped the price a couple of thousand here and there and finally after a year and half, the sellers became desperate and sold their house for $365,000 with a $10,000 seller subsidy. Now, that house was worth $450,000 at the time it was listed, but because the sellers insisted that their house was worth more, they actually caused their house to languish on the market. On top of that the seller's mortgage payoff was $335,000, after the ARM reset skyrocketing their mortgage payments . So they literally walked away from settlement with pennies in their pocket. They now wonder would it have been better to rent the last two years. It cannot be stressed that sellers need to price it right to make their houses sell.