Doug Van EttenYOUR JOURNEY HOMEGrand Junction Free Press Real Estate Columnist

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May 3, 2012
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Local real estate Q&A: May 4, 2012

Q: We live in Fruita and I work clear out in Parachute. We bought our house in 2007. We want to sell here so we can buy closer to my work. But is it a good idea to sell in this down market?A: Hardly a day passes that I do not hear variations on that question.For starters, you did not say how much you put down when you bought your house or if you have prepaid on your mortgage - both indicators of whether you have much, if any, equity in that house.Let's presume you put 0-10% down at the time when you purchased five years ago. If that is the case, you are most likely what is referred to as "underwater" or "upside down" on your mortgage; unable to sell for enough to pay off the mortgage and associated costs of sale.If that is the case you may want to look at these, as some of the more common options:• Sell the house for what the market will pay; then, you pay off the balance of your loan to the bank. For example, if you owe $175,000, can sell for $145,000 after all costs, and then you write a check to the bank for the remaining $30,000 debt. Some people do this, but it is not common.• If you have had a hardship defined as a loss of one or both of the family incomes, death or divorce or a variety of other distress situations, a bank may accept a letter explaining those circumstances and allow you to do a short sale. Here again, a buyer pays what the market will bear; but, in this case the bank OKs the sale and they take what funds are available, leaving you with nothing upon closing. Here I suggest you consult one or both, accountant and attorney. There may be taxes owed on the difference, categorized as income, and in some cases the mortgage holder may reserve the right to come collect the difference from you at a later time. This will also result in an impact to your credit rating.• Keep the house as a rental. Since a sale in the current market will not generate you any downpayment funds for a next home purchase anyway, it may be best to rent this house and move on to your next purchase or rent somewhere else yourself. You can look on Craigslist, ads on bulletin boards or look at online house rental websites such as www.rentmyhousefast.com for the going rental rates.Compare what is renting to your house and mortgage payment then decide if you can cover the payment with the rent or if not. If there is a relatively small monthly loss between mortgage payment and rent, you can decide if you are willing to accept that loss. Another reason to seek accountant or legal advice might be to learn what rental property monthly and annual losses you may be able to deduct from your taxes. Another professional to consult before making the decision for you to leave your current house in order to buy or rent your next digs, is a mortgage loan originator. They will be able to tell you how your current house helps or impacts your ability to purchase another property.As with so many questions in real estate today, the answer is "it depends."--------------------Doug Van Etten is a licensed Realtor with Keller Williams. He has been helping families and real estate investors buy and sell property since the early 1990s. Most recently, Van Etten founded the Real Estate Investors Network of Western Colorado (REIN). For more information on real estate in general or the new REIN, reach Van Etten at 970-433-4312 or dougve@kw.com.


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The Post Independent Updated May 3, 2012 09:45PM Published May 3, 2012 09:42PM Copyright 2012 The Post Independent. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.