Gambling On The Market? Why Short Sale Now?
Could we be experiencing another housing bubble waiting to burst? Although headlines portray strength in the housing market, there is an influx of inventory entering the market sometime in the latter half of this year or early next year. The question is, are you willing to gamble on the market before you sell your house?
No expert can tell you with 100% confidence that the housing market will go a certain direction. There are variables that have signs pointing up. At the same time, there are factors that may negatively affect our market in the near future. Remember, the bigger the difference between what your house is worth and the amount you owe may determine how much you will have to pay after short selling your house.
- Affordability – Interest rates have maintained a pretty low rate for quite some time toggling around 3.5%. In the recent weeks, due to Bernanke’s speech and improvements in job reports, we jumped up to 4% which was much quicker than we expected. This lost buyers about 10% of their buying power meaning affordability is fleeting.
- Inventory looming ahead – On a national basis, experts are expecting about 600,000 houses to enter into the market. In King county, the percentage of houses scheduled for sale due to foreclosure has increased 135% from april 2012 to april 2013.
- Ability-To-Repay Rule: The Consumer Financial Protection Bureau announced that by January 10th of 2014, the ability to repay rule will officially be in place. This rule will enforce guidelines that will require stricter monitoring and verification by lenders for those who are trying to enter into the market. This is a good practice and yet, this could also prevent more buyer’s ability to buy.
If supply goes up due to this backlog of foreclosures and less buyers are in the market due to less affordability and tighter lending practices, we could possibly see another dip in our housing market.
Mortgage Forgiveness Debt Relief Act – If you do a short sale, loan modification, or even fall into foreclosure, you will be liable for tax consequences after January 1st of 2014. This is why so many short sellers are selling now before it is too late. There is a chance that they may extend this act. However, there are no guarantees and right now, the government badly needs these funds as exposed in our budgeting fiasco back in February to deal with our national deficit.
Waiting for the market to rebound before selling?
We are seeing strong appreciation rates at the moment and homeowners are hoping to get out from underwater prior to selling. Please consider that even if your house is worth $250,000 and you owe $250,000, this does not mean you can conduct an equity sale. With commissions, excise tax, title and escrow, you can round up 10% on top of the value that you will need to pay in order to do a conventional sale.
If you want to explore your options for a short sale, please make sure you are working with the best in the business. Contact us here and let us help you determine what is the best option for your situation. We will connect you to the right experts whatever your need is.
Hope this helps