Not so long ago, homeowners would just hire a realtor to list their property with the intent of making a profit on their investment. If you purchased a home from 2001 to 2008 you will find this is no longer the traditional way to get out from you current property. There will always be those few exceptions to rules and maybe you can sell with the traditional avenue. If this is your case, I would encourage you not to test the waters and see how much money you can recover above current market conditions. Price the home fairly and you will receive higher dividends in the short term than letting the home sit on the market.
More times than not, the nasty thoughts and terms of foreclosure, trustee sale, or short sale come up when you want to move from your current home. We have always viewed our homes as our nest egg or greatest investment even above our stock portfolio. To ease our conscious of the word foreclosure, we have come up with the term: strategic default. Since the home is worth far less than we owe on it, why not just walk away? Makes sense from an investors point of view, doesn’t it?
Arizona is a non-recourse mortgage state and has Anti-Deficiency Statutes to protect the homeowner. Does this mean you can just walk away without any future obligations? Maybe, depending on the loan you have and the guidelines which the property falls under. Non-recourse laws only apply to “purchase money” loans (i.e. original home loans that are used to purchase the property). All HELOCs and home equity loans are considered recourse loans and the lenders for these loans may sue borrowers to recoup these loans. Vacant land and properties on over 2.5 acres do not fall under the guidelines as well.
A short sale property is debt forgiveness of the loan upon by the bank upon the sale of the property. Sounds like a no brainer, but debt forgiveness is taxable. In 2007 Congress passed “The Debt Forgiveness Debt Relief Act and Debt Cancellation” to help these troubled borrowers. The debt forgiveness from a short sale or a mortgage principle will no longer be taxed. The property would be sold through a realtor similar to a traditional sale with many more conditions and guidelines set forth by the lender who owns the note to your property. The HELOC will also be negotiated into the sale of the property. The property will be sold as is and the seller is no longer responsible to fix mechanical issues or defects. Can you still achieve the same Anti-Deficiency status as a foreclosure? Most likely if you realtor negotiates the right wording into the bank’s approval letter. More and more banks are offering relief of debt in the approval letters.
The facts are foreclosures are down 7.1 percent compared to last year at this time. Many more sellers are taking the short sale route. Banks are taking the loss on a short sale over a foreclosure because the loss is generally less costly. There is a significant difference to your credit and recovery period between a short sale and a foreclosure. The stigmatism of the word foreclosure is not what it used to be.
The last and most important remark I can emphasize is to please discuss all your options with both your accountant and a good attorney who deal specifically with short sales, loan modifications and bankruptcies before you decide to walk away or short sale your home. The Phoenix market is in recovery mode and we have light at the end of our tunnel.
If you have taken a drive through any local neighborhoods lately, you’ve probably noticed lots being cleared, land being surveyed and staked, or construction trucks lining the roads. Well be prepared to see slabs being poured, framing crews buzzing around and roofers stacking tile; the home Jbuilders are stepping up there game.
Just in July alone, home builder confidence rose 6 points. That is the steepest climb in a entire decade, says The National Association of Home Builders.
“Builder’s confidence increased by solid margins in every region of the country in July as views of current sales conditions, prospects for future sales and traffic of prospective buyers all improved,” said Burry Rutenberg, chairman of the National Association of Home Builders. “This is greater evidence that the housing market has turned the corner as more buyers perceive the benefits of purchasing a newly built home while interest rates and prices are so favorable.”
Most lots were previously sold for a loss in foreclosure. Now builders are able to purchase the same land for half the price! A little over $90 million has already been spent by home builders in this year alone according to the AZ brokerage firm Land Advisors. It’s about finding the new niche and different hot spots to build.
Pulte Homes, the nation’s largest builders, beat out 6 other bidders to get a large amount of land, Fulton Homes has already started inventory advertising, and Hovnanian Enterprises, New Jersey’s largest homebuilder just entered the Phoenix market by acquiring 490 lots for $31.5 million. New start homes are up 23.6% from a year ago and rising. With the way the market is shifting, it is predicted to improve up to at least another 12%.
Needless to say, for all of you who have searched up and down the MLS, previewed a countless amount of homes and are still led straight to a dead end; why not consider a brand new build? Due to the low inventory, bidding wars and dragged out foreclosures, consider a ‘right’ turn and see what our valley home builders have to offer.
The weak economy and financial crisis this country has experienced has caused roughly four million American families to lose their homes to foreclosure according to some recent statistics. The stress of foreclosure changes and significantly impacts families and can often leave them in a state of crisis. Historically, certain events such as job loss, illness, accident or divorce triggered foreclosure, now it has been spurred on by a weak economy, bad loans, declining property values, and a global recession. More and more Americans from all different economic classes have found themselves in this situation. Chances are you probably know at least one family who has been affected by a foreclosure crisis.
Foreclosure may mean the end of your house but it does not have to mean the end of your family. Some families will strengthen their bond in a time of crisis. Here are a few things that you can do to ensure that your family survives the foreclosure process.
- Grieve your loss. A house is a home and not just shelter, it’s a place of security where family memories are made.
- Avoid the blame game. It’s okay to be sad but don’t allow it to fester and become anger. Decide to work on a new game plan together..
- Keep the children’s school & activities the same if possible. Children need continuity and routine. If at all possible keep them in the same school and with the same friends. If that’s not an option arrange for play dates with their friends.
- Should we go public and how public. Discuss with your spouse what needs to be said and who needs to know. This is a very difficult time for some people so please respect your spouse’s need for privacy.
- Regroup. Rent for a while and rework your finances. Give yourself at least a year to regroup emotionally and financially. Work as a team and make saving a new habit and family goal.
Foreclosure can set you back but it doesn’t have to mean the end for your family. Learn from your mistakes, set some realistic economic goals and move on.