Navigating These Economic Times

Larry O. Doss Sunday, May 17, 2009

The other morning a GreatWest GMAC Real Estate professional was brainstorming with another Realtor. Both agreed that in addition to helping buyers purchase property, and sellers to sell their homes, they had voluntarily taken up the shield, for helping past clients, friends and family, to stay in their economically challenged homes during these difficult times.

Currently, they were averaging one or two calls a day, running the gamut consisting of the following:

(1) A friend, who bought a house in the 1990s, built up equity, then put on a second mortgage to finance an improved life-style with boats, RVs, vacations, big screen TVs, etc.

(2) A couple, who had purchased in 2005 at the height of the market, and Mr. homeowner, had now lost his job.

(3) Other homeowners have owned their home for 11 years. They have drawn out equity along the way to start a business, and now found the business, due to the economy - faltering. This couple is currently upside down in equity, and unable to afford the monthly payments; and the bank isn’t cooperating very well in helping them obtain a loan modification or assist them in accessing the current lower interest rates.

However, even with the above-mentioned problems, there are things, which can help quell pain being felt by many homeowners dealing with difficult monetary issues.

For the friend mentioned in #1, it was suggested they begin liquidating some of the “toys” which had been accumulated over the last few years – the boat, which hadn’t been used in 3 summers, scuba gear, and a RV. This couple actually managed to sell these items, and although they took losses, managed to acquire from their sales, enough to pay off the second mortgage, which alleviated much of the pain. They are now currently trying to refinance or modify their existing first loan to a much lower interest rate. But already they are feeling in an improved position.

Homeowners identified in #2, are in a more difficult position. Their bank has offered them forbearance, and they are inclined to accept rather than simply walking away from the house. Also, Mr. homeowner has received a job offer, and although it won’t pay as much as his old job, there is reason to have some hope that with other budget management, they will be able to manage through these difficult times.

The couple illustrated in #3, is in a somewhat dire predicament. It is suspected that there is MIP/PMI insurance on the existing mortgage. Banks in this situation seem to be more compelled to simply let the home go into foreclosure rather than bargaining on loan modification, or agreeing to a “short-sale” if the mortgage is covered by a mortgage insurer. We cannot help every situation which surface with troubled homeowners, but knowing options exist can often be helpful.

It is not known how many folks have been advised to simply not sell yet, or to find other options if they can. Like couple #1, perhaps liquidating big-ticket assets (boats, RVs, etc.) to buy time, or restructure your financial landscape is a good solution. After all, everyone needs a roof to dwell under. And trying to sell now as a traditional seller, when the banks are slashing home prices to get troubled assets off their books, doesn’t help the selling value of the traditional homeowner. In some instances it may be wise to wait if you can.

We understand that having a real estate professional giving advice to not sell, may seem odd, but as professionals, we are also duty bound to provide real estate advice that we deem important to the home buying and home selling public.

With all this being said, there is an important thing to consider. This is an excellent time for many to move up to a bigger home, if they are currently financially secure. Even if it requires selling a current home at less than a few years ago, the more upscale home is going to be available at a more affordable price as well.

At the end of the day we understand that how we assist in guiding folks through difficult times, will likely reward downwind. Right now, it is about seeing all of us as in this together.

Let a GreatWest GMAC Real Estate professional help expore your options.

Written for GreatWest GMAC
by: Myrl Jeffcoat

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