There are millions of Americans who are short selling (selling their home for less than they owe) their homes or losing them to foreclosure. Frequently we are asked two questions: Will anyone rent to me? and Will I ever get to buy a home again? The answer to both of those questions is yes!
First, the rental market is thriving. The reason is because when someone leaves their house due to short sale or foreclosure (or giving it back to the bank), they need a place to live and no bank is going to give a loan immediately after losing their current home. So they need to rent. Anyone who rents has to understand that if a perspective renter had good credit and a substantial amount of money to put down, they wouldn’t be a renter! They would take advantage of the good mortgage rates and cheap homes and buy! While that isn’t always the case (there are instances where it makes more sense for someone to rent than to buy, like constantly relocating for work) it is an overwhelming majority of the time. Armed with that knowledge, landlords understand that most people who are going to apply to rent have bad credit and everyone needs a place to live. Most landlords will certainly consider (and most will rent to) people who have lost their homes.
What about buying? Before the current market conditions took hold, bad financial items on your credit (like foreclosures and bankruptcies) would make someone largely unable to buy a home for 7-10 years. However, it has become so prevalent today that it isn’t financially reasonable to assume that banks will (or can) wait that long. Their is talk that 10 million homes could be sold either through foreclosure or short sale (and that doesn’t include the number of bankruptcies that are out there). If banks told 10 million families that they couldn’t buy a home for 7-10 years, what would that do to their bottom lines? There are too many people who can make too much money for the banks for the banks to simply tell them all ‘no’. What we expect to see is that banks will make people sit on the sidelines for a couple of years to prove that they have their finances in order. Then when they apply for a loan, they can show the bank that they are in control of their money and can truly afford a modest home and banks are going to accept those people.
If for some reason the banks decide that they are not, it can be expected that the government will step in and expand the FHA program even further than it already is so that they can back loans to make sure that the money starts flowing in the economy.
The bottom line is that 10 million families have too much potential profit for banks to pass on. If you lose your home or short sell your home, done worry. Get your financial house in order and then in a couple of a years you should be able to get back into home ownership.
If you are struggling, need to sell or rent or if you are the person looking to buy, let one of the great agents at Tiered Real Estate help you!
If you are a watcher of the stock market you will notice that many times the market will undergo a “correction.” This usually happens when stock prices race up to a high level. Then investors will sell stocks to pull out profit and the prices fall. Hence, a “correction” in the market.
Real estate appears to be going through a “correction” as well. Prices raced up to a high level and then many sold off and took out profit from their homes. Like most corrections they tend to drop considerably lower and then start climbing back up and there are swerves along the way. Think about driving your car. If you are sliding and you turn into the skid (like you are supposed to), your car will turn and you may have to make another small correction or two to be back to going straight again. We have been experiencing a drop and there have been some ‘swerves’ where prices have increased and market times have dropped, while there have also been areas where prices have again decreased and market times risen.
Unfortunately, housing is not like the stock market in terms of expedience. You can’t call a broker and sell your house today like you could sell a stock. Sales in real estate take time and even if you had a buyer today for your home, it would take a minimum of a few days (for a cash transaction) to several months (for a short sale).
So what happens when the prices start to drop and everyone else decides they want to get out? You end up with the current market and creative, new ways of getting rid of homes. We have short sales (where owners sell for less than they owe) and foreclosures (where the bank takes the home back from the owners). These are both part of the current market correction. Anyone in the stock market will tell you that it cannot go straight up forever. There will be ups and downs along the way. To accommodate this correction, the banks had to either find ways to let people pay significantly less on homes they owed, or they had to find ways to get people out of their homes and let market forces (supply & demand) take over.
So while many people fret over the number of short sales and foreclosures and many worry about the stigma of short sales and foreclosures (either on them or their neighborhood), everyone should realize that this is part of the market correction and largely is going to be universal throughout the market. That means that every neighborhood should experience the same issues. In fact, we should realize that many homeowners are taking advantage of the current situation and leaving their homes intentionally so they can set themselves up for a better future. Homeowners who are constantly struggling to tread water are realizing that they don’t want to live like this for the next 2, 5 or 10 years and are better off leaving now and realigning their finances and saving for the future.
Once we get through this correction (which will take longer than a stock market correction because of the time it takes to buy and sell real estate), hopefully everyone will have taken prudent steps to firm up their finances and prepare for a better tomorrow.