South Orange, NJ – Many homeowners bought their home at the peak of the market. In the hardest hit areas, they paid $500,000 for homes that are not selling for $250,000 (or even less.) Their home is costing them $4,000 a month. (That is the total after paying property taxes and insurance.) Renters have moved into the neighborhood and are paying less than $2,000 to rent a comparable home.
It just seems like these homeowners are getting an unfair deal all around. Should homeowners dump their homes in favor of a lower priced home? Some people say No! “That is breaking your word. If everyone did it, just think of what would happen?” they say. There is a little problem with that logic. Many of those homeowners see everyone else taking advantage of the system. It has gotten so bad that in some neighborhoods most of the homes have been abandoned.
Why shouldn’t a homeowner do what is best for themselves? After all, they can save hundreds of thousands of dollars. Let’s say they short sale their home with a $500,000 mortgage, rent for 2-3 years, and then buy later. But, what if home prices appreciate over the next few years?
If they are already upside down by 50%, then it still may make financial sense to short sale now. If the housing market has improved by 5% a year, their $250,000 house will have increased to $289,400 in three years. That is still much less than $500,000. In addition, they will save even more on interest payments. I'm not recommending this. I just want to lay out the benefits and leave the decision up to them. Much more on this subject can be found on my short sale blog.
Thinking about a short sale? Discover how other sellers successfully avoided foreclosure by completing a short sale by clicking here.
Thinking about a loan modification? Our Essex County loan modification kit has the instructions you will need to get a loan modification approved with your bank. Click here to request a copy.
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