There are a lot of homes here in Rogers that were bought during the building boom of 2006-2007. Of all of the cities in Arkansas, Rogers was one of the boomin-est places.
Now, some of these people have lost their employment, moved out of state, or for some other reason, just want to sell a home. Most of the people who bought a residence during this time are “upside down” on their home. That means that they owe more on their home than what it would sell for in today’s market. One example is the home that we have listed at 1827 Craig.
Without going into any gory details, the owner paid over 100,000 for this home. With a normal paydown, the owner would still owe about 100,000 on the loan. The owner wants to sell, and the market value is about $60,000 for this home. What is an owner to do? If we list the home for $60,000 and the seller pays real estate fees of 6% and shares in the closing costs, they are going to need around $5000 to close. That leaves a net sale of around $55,000. If they owe the bank $100,000 then they are going to have to bring the $45,000 balance to closing.
I don’t know about the rest of you, but with a soft economy, I don’t have an extra $45,000 just laying around. What to do? A short sale.
I got a letter from the owner explaining his situation and authorizing me as his real estate agent to have access to his account information. We filled out some forms and sent them to the bank. The bank agreed to a short sale where the seller gets a Realtor (me!) and puts the home on the market and we sell it. There are some conditions about who can buy it (no family members or associates).
Now, the investor (or bank t0 most of us) will have to eat the loss. But they would rather do a short sale than a foreclosure. With a short sale, the bank and the owner work together to quickly sell the home and everyone cuts their losses. One bank officer told us that it costs them about $26,000 to do a foreclosure. Then they still have a home that needs to be sold!!
The bank even throws in a little something for the seller. If the seller takes care of the place and does regular maintenance, helps get the home sold, and doesn’t do any damage. The bank will give the seller some money at closing. This “Cash for Keys” concept differs from bank to bank, but typically the payout is somewhere between $1000 -$3000 depending on a number of factors.
If you owe more that your home is worth and you just want out. Contact your bank. Or better yet, contact me, and with your written permission, I will contact your bank! Let’s get your home sold and get on with life.
Here is a letter I just sent to a prospective client after visiting on the phone about his situation. He has a home here in Rogers that he paid about 175,000 for. He wants to sell it with enough to pay all his fees and closing costs (around 200,000). I don’t think we can do that in this market. His home is worth more like $150,000:
I think we are going to have to go over and measure the home. The original listing advertisement says 1680, and the tax records say 1578. Someone is off.I hope I didn’t add more confusion today, but let me write out what I think are a few of your options:
1. Sell your home. I feel like we should ask $100 or less per square foot in order to sell it in a timely manner. That would put us at about $159,000. You mentioned that you would like to sell for about 200k in order to pay all of the realtor fees and closing costs. One thing we could do is list it at $189 or 199 and then see how it goes. If we don’t get offers on it, then we need to plan on lowering the price, say every 30 days, until we do get offers.
2. Rent your home. We can rent out your home. Harris McHaney Property Management charges to get a tenant and a percentage each month of the rent to collect rent and make sure repairs are done. If any repairs need to be made, that is paid for from your rent proceeds. (basically, you pay for it).
3. Raise the rent with your brother. (Brother is paying about 1/2 market rent)
4. You contact the bank about doing a short sale. This is where you inform that bank that you are going to move, and you cannot sell your home for what you owe on it. This will cause some damage to your credit. You will want to contact your accountant or banker to see what exactly will happen on this.
5. I contact the bank about doing a short sale. I let them know that you are going to move out of state and that we can’t sell your home for what is owed. The bank knows that you are serious because you have a Realtor involved. This will still impact your credit in a negative way.
6. Just keep on doing what you are doing.
There are a few things to consider.
1. If your payments are $1500 per month, you are paying 18,000 per year to own a home. If your mother isn’t going to be using it, and you are not planning on moving back here, I really don’t think you should keep the home.2. Renters may damage your home. If you rent your home for 800-900 per month for a year, then you still have to pay 600-700 per month. If your house is empty, that goes up to $1500. If they damage your home, that could offset any gain from renting.
3. Banks may not want to lend money if you already have a home. If they do lend you money to purchase another home in California or another state, they will want PROOF that your income will be enough to comfortably make the payments on both homes.
If you are not going to be here, I would either sell or do a short sale. If you do a sale, you need to talk to your bank and see what the payoff is first. That could help us set an asking price that covers all of your selling expenses and lets you get out from under your home.
I will be happy to help however I can.
If you need help to see if you are a candidate for a short sale, fill out our contact form:
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thanks for this information.