Expert: Dick Dennis - 6/28/2006

Question
good day.
I live here in N.VA and purchased a house about a year ago.  We bought the house right at the peak of the "housing bubble".  Now I see that the housing market is crashing around me with no end in sight.  I only planned on staying in the house a few years (<5) to begin with.
The question/problem is:  My mortgage is 540K and the house is now worth appx 530K.  The value keeps going down and I want to jump ship before its too late.  I don't think waiting 1 or 2 years will help.  In fact, I might be worse off.  With a 6% realtor commission and the fact that I still need to come up with the remaining balance upon closure, my options seem limited.  I don't mind paying some money out of pocket to get out of this mess, but I'd like to keep the pain to a minimum.
Should I sell now?  Or wait?  Either way, I plan on moving some day.


Answer
What you don't want to do, Bryan is PANIC! Values indeed may go down, but if you originally intended to live there up to five years, then continue with that plan as long as you can still make your payment obligations.

The only other option besides trying to sell the property for about $50,000 less than what you paid is to let it go into foreclosure and then ask the lender to do a "short pay" with you. That is when the lender agrees to accept a lesser payoff than what you owe and takes the key to the property. Or you sell the house to a buyer at the lesser price while doing a short pay.

But be aware that the IRS considers a short pay as a "mortgage relief" and you may be hit with an IRS notice for more taxes. All this doesn't include what it will do to your credit standing.

I say be very calm about this. Within five years things may be lots better.

I do wish you well.

Dick Dennis               dixiedee13@aol.com

www.OldProblemSolver.com