If you’re having trouble making mortgage payments should you try a Short Sale, or is a Loan Modification better for you?
Part of the answer is know what your home is worth. Here’s a new tool to let everyone living in Valley Center, CA know your home value today, and help you decide if a short sale is your best option.
First, let’s get a picture of what happened to home prices in Valley Center during the past nine years.
I created this chart of average housing prices in Valley Center from 2001 to 2009…it will be good for another few months…and I’ll continue updating so keep checking back to see the latest news.
We started the decade pretty well…with home prices increasing until the peak in 2006.
After 2006 the “Housing Bubble” started to pop…and you can see from the chart we really entered the price declines in early 2007.
Right now we’re seeing price declines in Valley Center slowing down…but expect to see prices dropping at least through the end of 2010 before we see any real price gains.
OK…now that we have the picture in front of us…how does this information help distressed homeowners decide if Short Sales are a better option than a Loan Modification or a Foreclosure?
Owners with true hardship or distress have an open door right now for Short Sales. Loan modifications generally only lower payments…97% don’t reduce principal owed…and most of the time they are only temporary modifications…most last no more than 5 years.
Ask yourself this question…Do I think my Valley Center home will recover enough value in 5 years to be worth more than the loan balance?
If the answer is NO…then a loan modification may not make any sense…if you are going to be faced with another mortgage payment crisis in 5 years, why not just get it over with now and start rebuilding your credit?
How do you decide what you need to gain in price to get back to a place where you owe less than the home is worth?
This handy little chart will give you a quick idea of what your home is worth right now…based on what you paid when you bought your Valley Center house. 
Here is how this works…most of us paid a fair market price when we bought…in any year. This chart shows you how much the price of the average home in Valley Center, CA has changed from purchase until the end of December 2009.
All you need to do is look up the year you bought…then look over and see the percentage lost or gained from the original purchase price.
For example, if you paid $625,000 in 2006 for your home…you reduce that by 42%…so your present value is close to $362,500.
This really helps you decide whether a short sale is your best choice.
Look at the new value…many folks used loans greater than 80% of the purchase price…so for the above example that person could owe $500,000. The difference between today’s sale value and the loan would be about $163,000.
Ask yourself…do I think my house will gain back all the lost value in 5 years?
That example would mean you need 7% annual appreciation…that’s possible…but more likely you will get 3%…so you would still be $80,000 underwater at the end of five years…for this example…possibly a lot more if you have a larger mortgage or borrowed a larger percentage of the purchase price.
Does a Short Sale make more sense than a Loan Modification?
Every homeowner needs to decide for themselves. No one knows if prices will go up or continue down. Home ownership has a lot of benefits…some folks will be better off to stay put and try to hang on…others will do better to sell now…use two or three years to rebuild their credit…and then buy again.
The only thing I know for sure is a foreclosure should never be your first choice. Please see the other articles here about how foreclosures can have huge negative consequences…and leave you will all the debt still in place…forcing you into bankruptcy.
If you have any questions please call Bob Davis at 760.525.0123
Phone Calls are always Free…Knowledge is Priceless!
{ 0 comments }
Subcribe by RSS
