Is your house not worth what you owe? (underwater)

There are many families underwater on their homes.  In their mind they know that there is no way to sell the home, pay off the mortgage and all the closing costs involved in a sale.  At this point in a families/couples life there needs to be a heart to heart conversation with everyone (decision makers) in the family.  Sometimes this is the husband and wife, or includes the children, or even includes the parents of the husband or wife.

You have options.  It is not cut and dried with only one outcome. Here are a few questions you need to ask yourselves when faced with a short situation.

Is the payment unmanageable?

Is it important to stay in the house for the kids?

Is the principal balance an impossible number that will never be realized in many years?

Is the home still dropping in value? (Super jumbo still dropping, bottom market holding/small improvement.)

Did parents of family help with the down payment when you purchased the home?

Does everyone agree on what needs to be done?

Is the property a rental?

Are you going broke trying to keep an inevitable huge loss that will deplete or destroy your retirement, savings, or marriage?

Will putting the short sale off until next year or the year after that have harmful tax consequences in the future?

…………… more questions?

These are all questions whose answers will direct you in your decision on what to do with your home or property that is underwater. The last question is one of those that has to be answered ASAP.  This is now the end of August 2012 and the tax break that comes with a short sale is about to expire.  Now in normal times I would count on the Senate/Congress to extend the tax break on “relief of debt” that comes with a foreclosure or short sale.  These are not normal times and part of that Fiscal Cliff that our government is taking us over is the tax break on relief of debt.  You need to check with your CPA and see if you need to act this year because it takes banks at least 3-4 months to finalize a short sale.

You need options and ideas on how to proceed when it comes to all these questions.  I like to give people options and would be willing to sit with you and your decision makers to figure out what is best for you and yours. Don’t just ignore the situation and bury your head in the sand.  This is your house and you need to be pro-active when it comes to your financial position.


As always I would love to help you with your short sale here in the LA area and I can recommend an agent if your out of my area.

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