I have been always asked this questions many many times, and I always is reluctant to answer it meaning cannot answer it straigt because it may come back and haunt me. This is a very difficult decision of whether to keep an undervalued home. It is painful to discuss the pros and cons of keeping a highly undervalued home in this crisis. However, in this short piece, I am going to attack this issue in my own peculiar ways. And please think, I am not alone. It is as usual not a legal advice. You are the final arbiter in your own complexity of issues.
Let me analyze my arguments and present it in an orderly way. I had very reluctantly said to the prospective clients, let the home go. Very little. Why? Becuase I am an optimist. I hate short selling or surrender of deeds. It is an anti American dream, and it perpetuates a bad economic cycle. The short selling should be stopped. It is an invention of real estate brokers to make money and make endlessly make money and capitalize out of the miseries of the people. They have always made money, and exploited every bad situations and they are doing it again. They are short sale expert. Who benefits most from short sale? Of course the real estate brokers and the banks. Because the like the pawn-shop value of your home. They want to erase this negative things on their books and start afresh. Would you be getting anything from this? Of course not. Who makes money? Of course not the homeowners. Not a single penny goes to their pockets. But what can you do when you have no equity in your home.
– Did you buy this home as a primary home?
If you bought this home as a primary home to spend times with your families, and you bought it because the school is close by, and your children can walk to school. The reasons are still valid even after the equity is lost. Your children can still walk to school and they have friends whom they spend quality time. They are building lifelong friendship.
–If you bought this home because of Tax Breaks from IRS?
The reasons are still valid. You are still getting tax breaks and you needed a shelter because you were making more money and giving it in the form of taxes to uncle Sam. So, you thought a house would give you the appropriate shelter. These reasons are still valid even after you have no equity in your home. Don’t you get few thousand dollars at the end of the year from uncle Sam? If so, that is the net benefit to you.
–This home you bought is because you love this home?
You fell in love with this home. The walls of this home is decorated with the pictures of your families, the sweet moments at or around the fire places, the healthy time spent in your living rooms, in the kitchens, the sweet aroma of food and fragrance coming from the newly embedded flowers, and of course the new garden you built with your own hands, making endless trips to the local nurseries. Your kids helped you with that waling path made of bricks and mortars. The window treatments, the pictures of your parents hung on the wall. These are still the valid reaons even after the depression in the housing market and loss of your equity.
–You still have to live somewhere? I have counseled clients to let their undervalued and expensive automobiles be returned, to save their cash flow. Yes, I had advised my clients, but to let the primary house go—Truthfully, I have been reluctant to give this advice. Make your own choice folks. I am not an anti American dream. I can’t tell you to live on trees or under the highway bridge. This is your home, protect it. Because, basically this is not a legal matter. It is an emotional matter, and let your emotion decide. What you want to eat today? This is your decision, and someone cannot force you. Telling their clients to abandon their home is counter intutive to me, it is like a stock guru who has his own TV finance shows, telling his audience, buy stock, buy stock, and all of a sudden shouts in one bad market day—sell your stocks. Truthfully, when DOW was dipped sometime ago, I seen myself a guru (much acknowledged) telling clients, Sell the Stock and Sell it Now, and that created a big panic in the market. Next day, he was in good morning America, and he apologized for his irrational exuberance. Do you know home. Watch him on MSNBC, he is the buy with his sleeves rolled high, and shouts like a circus clown everyday around 7 pm.
Let us call a spade a spade. The current economic crisis is not abating and as it relates to housing, will continue to press down on home values for 3 to 5 more years. The FEDS had done something, some half hearted measures, the lenders are not fully cooperative and hired lots of nincompoops, who does not how to add two plus two. Their math is wrong, their manners are rude, and they don’t want to learn from anything.
-Rental? Once you abandon your home, you need to find a rental, and the cheapest rental in Las Vegas for a family of 2 or 3 is in or around $1200. You don’t know what you gonna get, and where you going to live. You probably needs change of school for your children, your commute time shall be changed, and above all you don’t know who your neighbors will be. You were in that situation, and that is why you bought this home in the first place.
–Did you try loan modification.
That is the most important questions. Did you try lowering your payments by talking to your lender, talking to some other knowledgeable people, talking to some qualified attorney. Had you taken all of the steps and still can’t find a solution. Now you got enough material to think about. Would downsizing is an important factor. Again, you did not bought this home to sell right away, you wanted to sell say in 20 years from the date of purchase? What is so hurry? Had 20 years came yet?