Debt Consolidation Credit Counseling In Phoenix

"Do I really need a house short sale?" That's the first question you should ask yourself. If your way upside down on your mortgage, and you want to avoid foreclosure, read on! I'm not a real estate pro, I'm just an investor who got caught up in the same situation your in now. For me, it hurts so much more because I have so much more debt. Here's how I determined my positions:

1) Interview Realtors: Find one that you can trust who either specializes in house short sales, or has done at least 30 of them. An added bonus would be a degree in finance, such as an MBA and a real estate brokers license. The license gives them addition legal responsibility to act in your best interest. It might be wise to consult a CPA and real estate attorney as well, but it will be your realtor that creates and finishes the deal. Please make sure you don't get swindled by one the companies that asks you to send them the money up front. A legitimate realtor will pay ALL the fees including marketing costs, and get reimbursed when the lender pays the commission.

2) Price It: The first step is of course, to determine just how much trouble your in. The worse the situation, the better your chances of a successful short sale. Most realtors will help give you a current fair market value for your house, and what the short sale price should be. Don't waste you money on an appraisal, they won't do you any good here! Be realistic, and be aggressive in lowering the price. Don't let emotional attachment to the house set the price. You'll be even more emotional if you can't sell it! The goal is to be relieved of the debt with a successful short sale.

3) Now Do Some Figuring: Here's where I figured out if I needed a short sale. You can follow along with your own numbers: Take your total loan amount, and subtract the present value of the house. Not what it's worth, but how much you can get for it TODAY. This is how much your "Upside Down" in the loan. Then, figure your annual expenses including a year's worth of payments, taxes, insurance, maintenance, and repairs. This is your "Yearly Cost" to keep the house. Now, take the amount your upside down and multiply it by 8%. We will assume the best case scenario. In a FAST appreciating market, this is how much your house value would go up each year, if the housing bubble was over today. (yeah right!) We'll call this number: "Appreciation per Year." Finally, divide the Upside Down amount, by Appreciation per Year. This is how many years it will take just to break even with the amount you owe on your loan. No profit, no realized appreciation. Now look at your Yearly Cost to Keep the House. Is it worth it to keep it for that many years?

To illustrate: Let's say you bought a duplex with a $1,000,000 loan. In just one year it has depreciated drastically and will sell for only $800,000. Is it a good idea to seek a short sale?

Upside Down: $800,000 - $600,000 = $200,000 Annual Costs: Includes all yearly expenses = $60,000 Appreciation: Assuming a booming market = $200,000 x .08 = $16,000

Verdict: It will take 12.5 years of appreciation at 8% per year, just to break even with the original value of the property, and to get there, it will cost $60,00 per year! In addition, after 12.5 years of suffering, full ownership of the house is still far away and over $750,000 will have been paid in mortgage payments and expenses.

You don't have to guess what I decided to do. My numbers we're very similar to these. I know I'll take a hit on my credit, but for me, 2 -3 years to rebuild my credit is a lot better than 12.5 years of suffering. I'm going to call it quits and live to fight another day.