This blog post was written by Suzanne Grace, a real estate agent in Thousand Oaks, Calif., and a contributor to Relocation.com.
The drumbeat of negative news just seems to keep rolling on for the real estate market.
But does that mean you shouldn’t try to sell your home? This blog post will take you through the issues to consider when mulling over whether to wade back into the game.
And I’ll tell you why, at least in the community where I’m a real estate agent, it makes sense to wait 6 months before putting your home up for sale — and why you might want to consider it for where you live too.
1. How much equity do you have? If you bought prior to 2003, chances are you have some pretty decent equity in your home. But if you bought between 2004-2006, and used a 100% financing option, chances are you don’t.
So pre-2003 buyers who have a decent amount of equity might find it beneficial to sell if you have good reasons for needing to do so.
2. Why are you selling? If you can no longer afford the payment, it may not be in your best interests to sell. Many banks are now working with homeowners to modify their loans, essentially lowering their monthly payments to an affordable level.
While I cannot advise going one way or the other (we’re still early in figuring out how the loan modification program will work), it beats foreclosure. And if you are selling for a reason beyond your control such as a divorce, you may want to meet with your CPA to determine the tax benefits of buying out your partner, or see if you can come to an agreement that allows you to sell later.
There is nothing worse than being forced to sell in a downward-trending market.
3. Where do you plan to move? If you are staying in the area and plan to rent, you might be paying the same if not more than you are currently paying for your mortgage, particularly when taking into account the tax benefits of owning. Rents have increased over the last year to keep pace with demand as people leave foreclosed homes.
4. Are you trading up? If you are selling because you want a larger home, whatever you ‘lose’ on your current home will be realized in the gain of your new home, which has also taken a dive in price.
Wait Six Months?
Whether you sell now or later depends on where you live, of course, but I think my community of Thousand Oaks, Calif., is instructive about what much of the country might be seeing in the next six months.
Thousand Oaks has certainly seen its share of foreclosures, and an average 30% decline in home values. However, homes ARE selling. If you price your home aggressively (ie, at the same level as any bank-owned properties in your area), it will sell – and in most cases it sells within a week.
In fact, we are actually seeing a housing shortage in some areas – yes, a shortage. (Sounds strange in this market doesn’t it?)
However, maybe it’s not so strange.
Six months ago we saw a pre-foreclosure list of approximately 50 pages; today that list is down to 15 pages. I expect that within 6 months, it will be even more beneficial for a seller with equity to sell – we will be entering the peak season, the foreclosure rate will have dropped significantly (if the Stimulus Plan rolled out this month takes effect as planned), and the market will have settled after the changes the election brought forward as well as the Homeowner Stability Plan will have been given a chance to take effect.
The bottom line is this: While only you can decide whether it’s the right time to sell, President Obama’s $75 billion Homeowner Affordability and Stability Plan will help struggling homeowners by providing incentives to lenders, servicers, mortgage holders and borrowers to help modify mortgage loans.
This will definitely keep foreclosures off the market, decreasing the number of homes available – and the lower inventory may actually help bring the price of homes back up.