I hear from a lot of people that are underwater on their home, and they don’t know what to do. This happens when the house value drops below what is owed on the house.
As long as you plan to stay in your home, this may not be a problem because eventually the market goes back up. However, people run into problems when they have to sell their house. This typically happens when someone is transferred out of the area with their job, but owe more than they can sell their house for.
If this is the case, you have a few options, but only you can decide what is best for you.
- Write a big check. If you have to sell and you can afford it, you can simply write a check for the difference. This is an ideal situation, but it may be the best option if you want the house gone and you don’t want to sacrifice your credit.
- Short sale. A lot of people ask me about short sales and if they are eligible. I have a lot of experience with short sales. Here is the problem. Technically, yes, you can sell your house on a short sale, but the bank has to agree to it, and typically the bank will not agree to a short sale if they think they can get the full amount. If you are up to date on your payments and always pay on time, the bank will say no because they are getting their money from you. The only time a bank will agree to a short sale is if the payments are months behind and the rick of foreclosure becomes an option. If you have good credit and protecting your credit is important to you, then short sale will not be an option. If you don’t care about your credit and you are willing to not pay the mortgage for a few months, you can probably talk the bank into a short sale.
- Let it foreclose. You can stop making payments and walk away. This will all but destroy your credit, but it is an option if you are desperate to get rid of the property.
- Rent the house. By renting out the house, you can leave your job and have someone else make the payments for you. This will allow you to wait until the mortgage is LOW enough to sell or the market improves. Many people may be nervous about renting their home while they are living out of the area, but it is far more widespread than you probably realize, and it may be your best option. If you decide to rent your property, you will want to find a property manager that will take care of all the day-to-day stuff including maintenance, showings, collecting the rent, and handling emergencies.
The house value is dependent on several factors that are completely out of your control. You just have to focus on what you can control, which includes what you do to recoup your money.
Our experienced investment property management team can relieve you of the burden of managing your rental property while saving you some serious money! Call us today at (440) 220-7300 to see how we can help you!