By Suzanne Grace
Special to Relocation.com
You hear the constant drumbeat of negative news – foreclosures, exploding mortgages, plummeting house values.
But that doesn't mean now is not a good time to put your house on the market. We 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.
1. How much equity do you have? If you bought your home before 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 if you bought before 2003 and have a decent amount of equity, it may be beneficial to sell. You need to determine why it is you are selling and figure out your plans beyond that.
2. Why are you selling? If you can no longer afford the payment, it may not be in your best interests to sell. Many of the banks are working with homeowners to modify their loans – essentially lowering their monthly payments to an affordable level.
While I cannot suggest one way or the other (there are of course certain restrictions with a loan modification) it certainly beats foreclosure! 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, chances are you will be paying the same if not more than you are currently paying for your mortgage. Rents have increased over the last year in order to keep up with the demand due to foreclosures.
Don't forget that there are no tax benefits to renting. If you are being relocated out of your area due to a job change, be sure to research your new city as well – how depressed is it? Will the economy sustain your new job for the long term? Is it in your best interests to rent your current home and rent in your new city as well? What benefits will the company provide for relocating? Are they offering a buy-out?
Again, this is a loaded topic and it may be in your best interests to do your research, meet with advisors such as your accountant and real estate agent.
4. Are you trading up? If you are selling because you want a larger home, make sure you realize that what you may have "lost" on your current home will be realized in the gain of your new home.
For example, what you would have paid $700,000 for in 2006 will now be priced at approximately $500,000. On the other hand, if your neighbor sold for $700,000 in 2006, keep in mind that no matter how much nicer your new home may be, it may still only sell for $500,000 today.
Should you we wait 6 months to sell? It 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.
My community has certainly seen its share of foreclosures and an average 30% decline in home values. However, if the seller has priced their home aggressively, it will sell - and in most cases it sells within a week.
By 'aggressive,' price your home at a price that blends in with the bank-owned properties – if the recent bank-owned homes have sold at $100,000 you, too, will want to assess what the differences are (such as whether the bank-owned home had any structural issues or strictly cosmetic problems), and then set your price.
If the bank-owned home sold at $100,000 but needs a new foundation and a roof, there is no reason why you should price yours that low. On the other hand, if the bank-owned home is comparable to yours, you will need to price it similarly. Although there may be certain benefits to purchasing with a conventional seller vs. a bank, ultimately price is still the key.
That said, in my community, we are actually seeing a housing shortage in some areas – yes, a shortage. (Sounds strange in this market doesn't it?)
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 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.
Suzanne Grace is a real estate agent in Thousand Oaks, Calif.