Some home sellers tell me that the reason they have decided to do a short sale is because they are growing tired of waiting for the market to rebound. Maybe they bought their home in 2005 and paid $500,000 for it. That home today is probably worth about $250,000 or less. That’s a shocking drop in value for many Sacramento homeowners. It sort of hits you between the eyes.
Perhaps you look around your neighborhood and see foreclosures everywhere. Droopy for sale signs on bank-owned homes. Sign posts leaning toward the ground. Neglected yards with weeds and dead grass. Windows boarded up. Notices of trustee sales nailed to front doors. It’s sobering. So, you hope that as soon as the foreclosures go away, the market will improve.
Here is a startling fact for you. If you’re waiting for the market to come back, it’s not likely to happen for a very long time. At 4% appreciation per year, it will take about 18 years for that $250,000 home to again be worth $500,000. That’s assuming no dips in the marketplace, just a steady compounding appreciation rate of 4%.
Here are the numbers that reflect 4% annual appreciation per year:
- Year 1: $250,000
- Year 2: $260,000
- Year 3: $270,400
- Year 4: $281,216
- Year 5: $292,464
- Year 6: $304,163
- Year 7: $316,329
- Year 8: $328,982
- Year 9: $342,142
- Year 10: $355,827
- Year 11: $370,061
- Year 12: $384,863
- Year 13: $400,257
- Year 14: $416,268
- Year 15: $432,919
- Year 16: $450,235
- Year 17: $468,245
- Year 18: $486,975
- Year 19: $506,454
Perhaps you’ve got to ask yourself if you want to wait that long? Most short sale sellers can qualify to buy a home again in 2 to 3 years after a short sale. If you owe $500,000 on a $250,000 home, maybe it’s a good idea to sell it now, even if you can’t buy again right away. Even if you have to wait to rebuild your credit.
Suppose you sold that underwater home as a short sale this year for $250,000 and dumped that half-a-million mortgage. Then, you rent for 3 years and buy a home for $275,000 with an FHA loan, putting down less than $10,000. Your mortgage payment would be about half of your existing mortgage payment. At 4% annual appreciation, in 7 years you might be sitting in a situation with $75,000 in equity and a low mortgage payment.
Here is something else to consider. A mortgage payment at 5% interest on a loan of $250,000 is $1,342 per month. A mortgage payment at 5% interest on a $500,000 loan is $2,684. The difference over 3 years adds up to almost $50,000. Can you think of something else you’d like to do with $50,000 in cash than deposit that money into an underwater vehicle?
Maybe today is a good time to call your Sacramento short sale agent? It’s certainly something to think about.
Photo: Big Stock Photo
—
Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout Sacramento. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available through bookstores everywhere and at Amazon.com.
Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.
The views expressed herein are Weintraub’s personal views and do not reflect the views of Lyon Real Estate.
Tags: bank owned homes, buy again after short sale, fha loan, for sale signs, Foreclosures, sacramento short sale agent, sacramento short sales, short sale
Subscribe Feed (RSS)