I just went through all of this last year, so I'd love to chime in here and help sombody out, cause all of this is a shit sandwich any way you slice it.
Sorry your going through this.
What is my best bet as I try and sell my house? We want to move and here are some options... My coworkers think I should rent it for 2-3 years and then sell...paying down my mortgage and being closer to break even...Opt 2
1. Sell and loose about 20k
2. Rent for 1, 2, 3, etc. years and sell when the market is about even. Rent will let me make about 100.00 over the monthly pmt, tax (unhomesteaded), insur, etc.
3. Land Contract for nice downpayment and do the contract for certain time with a balloon at the end.
4. Walk away, but not an option since I can rent for what I owe per month...
What are the pros/cons and what tips do you have with your recommendation?
After going through exactly this, my rankings would be 2,1,3,4 to your options above, if losing $20k is due to writing a check at closing. If it's losing what you put into it, then 1,2,3,4..
I would find a good realtor and do a short sale.
-Geoff
Realtor is not that important, at least not as important as getting a good laywer. As long as your realtor knows how to answer a call, and do the paperwork in a timely manner, that's all you need, that, and a halfassed offer will get the ball rolling. The lawyer I hired took the bulk of the fee from the bank. All in all, I short sold my house for $1800 out of pocket, $500 retainer to the lawyer, and $1300 just to close the deal and get the PMI dickheads to sign off. The $1300 was optional, I could have fought it, but to get out of the deal that's was dragging me to the poorhouse for over 3 years, it was money well spent. Also, assume the realtors will have to take less than the stnadard 6% (total, i.e. 3% each), because the bank will likely squeeze them. If you find a realtor that's done short sales a lot, they will understand this. Everybody is doing this stuff on tighter margins. I am not saying it's right, but the bank is running the show. It's actually odd how hard the sqeeze you since they are going to get paid on the loss one way or another..
You can’t sell your house on a land contract if you still
have a mortgage on it – it must be free & clear.
Not true. I had a land contract deal going with my old house. I backed out of it once I learned that the realtor wanted the full comission at the start of the land contract. I'd only have xx% of the house price in my hand, but they wanted the full comission up front. Not a reasonable, and the way that the realtor agreement reads, they should not get paid until the seller gets paid. IF the buyer walked away from the contract then I'd be stuck relisting, and potentially paying another 6% comission on the contract price. Bullshit..
If you rent it, then short sale it, you might end up owing tax on the difference. The tax exemption under Obama's current plan is only valid if you have lived in it 2 of the last 5 years and haven't rented it. He just announced a new plan where you can re-fi to the market value as long as you are current on payments. Might want to give that a try.
-Geoff
Not 100% correct. 1) find a bank that will entertain your this re-fi option. It's been talked about for 2+ years. You still need to figure out how to come up with 20% down on the re-fi too.
2) If you rent, then it's an investment property. You can now schedule losses on everything you have ever put into the property. There are different schedules based on what you did, i.e. capital improvements, taxes paid on the property etc.. When we finally short sold our house, we had our tax-lady run the numbers based on the tax exemption vs. the capital loss. You have the option of claiming the loss in investment or not. When she ran both scenarios, the capital loss option netted us 4X the tax return vs the tax exemption.. So renting the house, even at a loss netted us better results. IT was nice to have that option, and it paid off. It put some better flavor on the shit sandwich. In all we lost a shit load of money on the house, but a healthy tax return took off the sting and helped my wife and I put some cushion back, pay off some credit card bills we ran up...more on the credit card thing in a min..
It's nearly impossible to short sell a home when current on payments, I tried and got screwed out of $1200 in realtor fees,inspections,appraisals. Had a buyer with cash and finances, after going 90% through the short sale - bank said I was unable to compete the sale because my current mortgage had never been in default.
Not true, and I thought this too. If you show severe hardship you can let it through. We got to the miss a payment phase (not 100% true, we would have still had $275 in savings to live on until the next paycheck... 1.5 weeks away, not a situation I wanted to be in), and it's affected us in credit more than it was worth. KNowing what I know now, I would not intentionally miss a payment. I have some tips I can share over PM with anybody interested.
Overall, this sucks, but there are things you can do to soften the blow, and maybe get some lube on the shaft you will be getting..
