I (Billy O’keefe) have been referring to your ‘Ground Zero’ for the last year and a half as the date you complete a short sale or foreclosure. This date signifies the start of the recovery of your credit and your financial situation because you now have the ‘event’ behind you. In my opinion I think it is better in the long run to get this over with as quickly as possible. I already know several people that have purchased back into the market at bottom (or close to bottom) pricing 2 years after they short sold their home. They are now in a much better equity building position. Had they held on to ride the market out, they likely wouldn’t be able to buy back in the market for 10-15 years when they regained enough equity to cover their mortgage and selling costs. In essence they have been able to get an 8-13 year jump in equity gain (and avoid some extra gray hairs) by getting rid of the toxic asset now. I know many people have an emotional attachment to their home but you need to start looking at your home like an asset and make the best long term business decision for you and your family. I am not only speaking from my experience from results with my clients but from personal experience as well. My ‘ground zero’ was a little over a year ago and I will be able to buy a home again in a year or so if I choose. In the mean time I have been renting and saving while I wait. In most cases, I have helped my clients rent homes that are much better for the same money or just as good for a lot less money. They are now in a position to save and purchase back into the market in 2-3 years. Prices will not likely be going up much during this time so they are not missing out much by waiting. Another important point to make is this: If you own multiple properties that you are upside down in get rid of all of them as soon as you can. I have worked with people in this scenario where they only wanted to sell 1 of their properties and stay in the other and wait. Well the successful short sale would go through and they would start their credit recovery only to kill it again down the road when they came to the same conclusion that they need to get rid of the other home(s) as well. Now they have stretched out their ‘Ground Zero’ to several years vs. several months. I know this sounds way too simple but it really is. I am not saying that everyone is able to get a perfect result but I can say that about 80% of the short sale approvals I am able to negotiate contain ‘full release’ clauses which prevent the banks from being able to come after you for the deficiency balance. Also, with the favorable tax laws it is unlikely that you will owe any taxes for the cancelled debt (I have to make the disclaimer of course that I am not a CPA so verify with your CPA please!). I have said over and over and over that there is absolutely no downside in trying a short sale. If at the end you are not comfortable with the terms that the bank is offering, you can simply decline the short sale, cancel the escrow, cancel the listing, and regroup. There are no upfront costs so there is no risk.
Please keep in mind that although it is my business and livelihood, I am 100% convicted that trying a short sale workout is the best course of action for anyone upside down in their home. That being said, I will never talk someone into doing a short sale. I provide a lot of information and resources (i.e. CPA’s, attorneys, etc) at my consultations because it is important that anyone that decides to take this route is 100% on board because of the amount of work and effort involved. If you or someone you know has questions please email or call me. All of my consultations are completely confidential.
Prudential Americana Group, Realtors