Many people are holding off selling their current homes because of the declining property values in the metro Detroit area and frankly most of the country. What many people don't understand is that this may be the most opportune time to sell and buy a more expensive home (buy up).
If you wait until the market goes up, and your house value increases, then the homes you are looking at purchasing have also increased in price.
Here is an example of how buying in a down market can be beneficial:
Assume your current home was valued at $250,000 some time back. Now it is currently worth $230,000. You would assume that you have lost $20,000 in equity. But on the other hand, the more expensive home, you are considering buying was worth $500,000 a year ago and is now valued at $450,000. You will save $50,000 on the purchase of this new home. So in short, you lost $20,000 on the sale of your home but saved $50,000 in the purchase of the new one. You just made $30,000 in equity.
Another thing to consider when contemplating buying in a down market is interest rates. Interest rates are nearing all-time lows right now. As they creep back up you reduce your buying power. For every 1/2 percent interest rate increase you have $25,000 less in purchasing power.
To sum this all up, selling in a down market and buying a more expensive home, assuming both properties have depreciated at roughly the same rate, is a very smart thing to do. You can actually come out ahead, but waiting for the market to head back up can cost you more money than buying now.
A good strategy is to weigh all the pros and cons and consult a qualified realtor to assist you. If you would like to discuss all your options, please feel free to contact me at 248.854.3829.
Tuesday, March 24, 2009
Tuesday, March 17, 2009
Reasons Banks Reject Short Sale Offers
Unless a property is advertised as "Short Sale Approved", no one knows for sure if the property will sell as a Short Sale. Generally, if a property has had an offer submitted to the lender previously for approval and the offer was rejected by the lender or countered, the listing agent will have a pretty good idea of whether or not the lender will agree to a short sale and how much they are willing to accept for a particular property.
If there hasn't been an offer previously submitted, the listing agent is treading in uncharted territory and no one will know for sure if a Short Sale is viable. At that point, everyone involved in the Short Sale is hopeful the offer will be accepted by the lender.
Reasons Lenders May Reject an Offer:
1. Short Sales List Price Is Too Low: A short sale list price generally has little bearing on the actual price a bank may accept. The list price may be too high to attract an offer or too low for the bank to accept. The house needs to be listed at an attractive price to entice an offer from a prospective buyer, but not too low that the bank will automatically reject. Having an experienced Short Sale specialist that is very familiar with the local area and property values in your area will be your best defense in getting the lender to accept an offer on your property.
2. Seller Does Not Qualify for a Short Sale: If the seller is asking for debt forgiveness and they have assets they are at a disadvantage if they are unwilling to work out a repayment plan with the bank. The bank will want to see current financials and a hardship letter from the seller that explains why they can not afford to pay back the shortfall difference. The seller needs to explain what hardship they have suffered. Just wanting to walk away and get a cheaper house is not a reason to do a Short Sale and most likely the lender will deny the short sale request.
3. Short Sale Package is Incomplete: It is extremely important to have an agent that is experienced in Short Sales to put your package together and submit to the lender. These lenders are overwhelmed and understaffed. If the package is not labeled and packaged as they direct, they may reject the Short Sale just because it did not meet their specifications.
4. Buyer Does Not Qualify: The desire that many prospective buyers have to purchase a home at a great (below market) price and the financial means to do so are two different animals. It is important to have a qualified buyer before an offer is made. Agents will require proof of funds or pre-approval letter prior at the time an offer is made to alleviate going through the whole negotiation process with the lender only to have the buyer not be able to obtain financing.
Research the experience of agents before chosing the one you want to represent you in your Short Sale. Ask them their success rate and if they have any experience with your particular lender. The more experienced agent you have the better your odds of having your short sale approved.
If there hasn't been an offer previously submitted, the listing agent is treading in uncharted territory and no one will know for sure if a Short Sale is viable. At that point, everyone involved in the Short Sale is hopeful the offer will be accepted by the lender.
Reasons Lenders May Reject an Offer:
1. Short Sales List Price Is Too Low: A short sale list price generally has little bearing on the actual price a bank may accept. The list price may be too high to attract an offer or too low for the bank to accept. The house needs to be listed at an attractive price to entice an offer from a prospective buyer, but not too low that the bank will automatically reject. Having an experienced Short Sale specialist that is very familiar with the local area and property values in your area will be your best defense in getting the lender to accept an offer on your property.
2. Seller Does Not Qualify for a Short Sale: If the seller is asking for debt forgiveness and they have assets they are at a disadvantage if they are unwilling to work out a repayment plan with the bank. The bank will want to see current financials and a hardship letter from the seller that explains why they can not afford to pay back the shortfall difference. The seller needs to explain what hardship they have suffered. Just wanting to walk away and get a cheaper house is not a reason to do a Short Sale and most likely the lender will deny the short sale request.
3. Short Sale Package is Incomplete: It is extremely important to have an agent that is experienced in Short Sales to put your package together and submit to the lender. These lenders are overwhelmed and understaffed. If the package is not labeled and packaged as they direct, they may reject the Short Sale just because it did not meet their specifications.
4. Buyer Does Not Qualify: The desire that many prospective buyers have to purchase a home at a great (below market) price and the financial means to do so are two different animals. It is important to have a qualified buyer before an offer is made. Agents will require proof of funds or pre-approval letter prior at the time an offer is made to alleviate going through the whole negotiation process with the lender only to have the buyer not be able to obtain financing.
Research the experience of agents before chosing the one you want to represent you in your Short Sale. Ask them their success rate and if they have any experience with your particular lender. The more experienced agent you have the better your odds of having your short sale approved.
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