Has Your Home Come Out From Underwater Yet? Let’s Find Out!
Home prices are on the rise. We are seeing over 10 percent annual gains on home values. Though that rate may be unsustainable, we may find if your home has come out from underwater or how long it will take you to break even and be able to finally walk away from a negative equity situation.
For years, homeowners have been sitting on their properties and putting money every month into a home that owes significantly more to the banks than the property is worth. In other words, throwing money into a negative equity situation. Many homeowners have already short sold their homes and are now building up equity living in their new homes.
So the question is, should I stay or should I short sell and buy again?
How long does it take to qualify for another mortgage after a short sale? The typical duration is 2 years. However, we have seen homeowners qualify much quicker than that especially for those who decided to proactively rebuild their credit.
So let’s do some simple calculations using tools that are available online.
- First, visit a home value estimator here or one of your choice. Keep in mind that you will have to add at least another 8% for closing costs (agent’s commissions, title&escrow, excise tax) so add that onto the estimated property value.
- Second, find out how much your remaining balance is to your lender(s).
- Third, use the rough estimate of what your property is currently worth and the remaining balance owed and visit John Harts Real Estate calculator here. Plug in the numbers as prompted. For the appreciation rate, I suggest using 3-4% as that is a reasonable rate for 2013 and beyond.
This useful tool will help you determine how long it will take your home to recover equity (break even).
Dealing with your home is certainly tied to emotion. However, treating it from a business decision may give you better financial results. IF it will take longer than two years, mathematically, wouldn’t it be wiser to short sell, save, and purchase another home taking advantage of the low interest rates?
If you live in Washington State, we can do a free comparative market analysis for your home to get a much more accurate estimate of your home. This way, we can see whether it would be in your best interest to short sell now or wait until the home gets out from underwater. Just contact us here or email me at Peter@seattleshortsaleblog.com with the subject line, “CMA please”
Hope this helps