Selling Home, Is it a bad idea to sell a house whose value has gone down? (short sales)

[mgepila]

My husband and I bought a single home condo two years ago and we are planning to sell it. It is a two bed 2 full and 2 half bath, with all fairly new and updated things since it was built in 2007. The value of the house has gone down trememdously in the last couple months and we are sick of paying for a house that is almost worthless. Our plan is to remodify our loan, find renters, or just sell the house all together. With our growing family, we are finding that selling this house sounds like the best option however we are not sure if it will even sell, and what penalties await us. Please help me with the best advice!

[User24]

I don't have a good idea of where you stand on this question: Does the current property meet your living needs, or does it not?

First, consider how much the property is worth compared to how much is owed on the loan. If the spread is too great then you cannot refinance. If the spread is small, then you might refinance, or even sell if you could afford to walk away from your downpayment in addition to making up the difference with your own funds.

Answer the questions at http://makinghomeaffordable.gov/ to get some idea of where you stand.

If you can't sell/refinance, then would you be able to become a landlord? You'd need to consider the rent payment versus your current mortgage payment, whether you'd have time to become a landlord, or hire a service to perform the duties of a landlord, pay the additional taxes... and of course, whether you have the savings right now to purchase a second home, and if you could afford to carry two mortgages should your renter miss a payment. And any other HOA crrr issues, if any, that come with renting.

[Oerdin]

Short selling does hurt your credit, since you didn't repay the loan as promised, but it is your legal right and sometimes it is a smart thing to do. I mean, why continue paying on a house which is $200,000 or $300,000 underwater when you can short sell and then buy a similar house for that much less? The downside is you lose you deposit but with so many people buying houses with no or little money down that isn't much of a lose.

[firsttimeowner]

I will buy it if its 170k or less. Seriously.

[NYSD1995]

You can't just short sell a house because it's too small or you don't like it anymore. Short selling usually requires lots of income and asset investigation because your lender has to approve it. Banks don't like doing short sales for people who can afford to pay their mortgage, and most of these government and state loan programs are for people in danger of foreclosure. Unfortunately, those of us who played by the rules and bought houses we could afford are getting screwed the worst in this economy.

Assuming you have no equity in the house you can't sell it without incurring some cash loss at sale. I have heard there are some options where you could roll the cost of the loss into your loan on the new home you buy. Not sure about that.

Most people I know in your situation (and I know several) either walk away completely and take the credit hit (personally I think this is not a good option) or they become landlords. The landlord option is good because you can hedge against the lost equity by waiting out the market a few more years and selling when conditions are better. I think by selling now, you are taking a huge hit because so many sales are deeply discounted foreclosures and short sales.

[VF1s]

Built in 2007? This wouldn't be a kb home would it?

[Huckleberry3911948]

no big change in rent income. a lousy time to sell just awful. geta a property manager.
unless you have over mortgaged the property.