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Shoud I try and sell now?

My wife and I bought a condo right after the housing market bottomed out in the spring of 2009.  Unfortunately the foreclosure way came in the late summer of 2009 and we lost another good 30k in equity in our coach home.  We really want to move at the beginning of next year but we aren't sure what to do.  We currently have a 3 bed 2 bath coach home and have 2 kids so we are already pretty tight on space. 

The question I have is should we sell now and take a loss and try to make that up in a house purchase that is most likely well below true market value?

We have the money saved to take the loss and we really want to get a house for our children but we feel trapped. We are very disciplined with our money and aren't looking for anything big to move into just want something with a yard. 
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April 09 2012 - Palatine
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Answers (11)

Life is a big balancing act.  You have a quality of life you want to provide for your family but those things cost money.  Work with a local real estate agent and accountant to find out exactly how you will fare if you are to sell your current residence in today's market. 

You will have to sell your current residence at a loss.  But the good news is that you can buy your next home at a great price.  Make sure your new home will meet your needs for many years.  The days of being able to quickly trade up are over.  You will probably be in this next home for many years before you get to the break even point.  

After assessing how big the loss will be when you sell, one of three things may happen.  You may realize it is not as big of a loss as you thought and you proceed with the sale.  It could be much worse than you thought.  Or there may be a middle ground where it makes sense to wait it out and see if the market improves.  After doing a deployment to Afghanistan for six months, I realize we often complain about things that are uncomfortable but actually tolerable. 

One thing happening today is the "strategic default".  Most people have a basic objection to this practice.  But for many families, the financial loss of selling in today's market is too great to overcome.  These families secure a mortgage for their next home using their current credit and savings.  Then they intentionally default on the old home and let the bank take it back.  Again, most people think this is just morally not the right thing to do.  But they elect to do it when they review the financial numbers with their accountant and see how it will position them for the long term.   
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April 10 2012
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Thanks everyone for your input.  I definitely feel like putting our place up for sale in the next 6 months is the way to go.  Here is my current situation spelled out in detail for everyone.  Hopefully I'm not missing something that would change everyone's opinion.

1.  Currently we are underwater on our condo by about $30k
2.  We have excellent credit, never missed a payment and never will.
3   We have $40k saved for a house but moving would leave us with only about $10k left for a down payment so we would have to FHA.
4.  Renting is not an option unfortunately as our association has rules in place to protect the community (I'm on the board so I agree with this).


I'll be reaching out to some realtors in our area over the next few weeks.  Thanks again everyone!
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April 10 2012
I think you really have to think about your family's needs. Even the most optimistic predictions for the housing market are not projecting any substancial jumps in housing prices, from everything I've read. We are going to be lucky to get back to annual 2% to 3% climb. You can look at that rate and see that your children could be grown by the time you are back to even.

Anything you buy now is going to be at its "real market value." Don't buy anything expecting it to increase in value more than that historic small percentage each year.

If your household income can support two payments, you could consider renting the smaller home out, and buying a new bigger home with a yard. You would want to be sure you could rent the home out for enough to come close to or exceed the mortgage and expenses. Just a possible option to avoid shelling out the cash right now.

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April 10 2012
Hi eknee, Palatine is down like all the rest around here,my opinion, sell the condo, buy the new home you want. the market around here is at the bottom. As home prices start to rise you will make up the loss on your new home especially if you are buying up. Single family homes are going to appreciate way faster than condos around here ((Lake and Cook counties). It sounds like you already are aware of this, you just just need some nudging :) Jim Starwalt
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April 10 2012
Kirsten, he has the money to make up the difference, hence it won't be a short sale...

eknee, you probably cannot take a tax loss on your primary residence, as one agent alluded to. If it were an investment property, you absolutely could, but I don't think you can on primary residence. irs tax loss primary residence
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April 09 2012
All the agents have offered great points that you should take into consideration. Just wanted to add that you should try not to be late on your mortgage because most CA lenders will not lend until 2 years after an approved short sales.  Also most lenders will not accept a short sale unless there is a proven financial hardship.

An agent with a distressed property designation, such as CDPE, can help you. A good Realtor understands the short sale process and helps with timing into your new home. It is not impossible! 

Kristen Jurevich
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April 09 2012
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Thanks Philip for the advice.  I will definitely be talking with my bank regarding selling in the coming months as well as trying to speak with a few agents.  

When a market analysis is done what are they looking at these days?  I server on my condo board and I know from talking with a few agents that its almost impossible to get a price with the number for short sales and foreclosures.
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April 09 2012
You probably need to speak with a lender or two to see what you qualify for based on the 'closing' of your current house unless you feel ok with buying before your current house closes. It sounds like you do not need to do a short sale because you seem to have the $$$ to make up any deficiency that might result. It also sounds like you have enough $$ to put for a down payment on your new house.You also should speak with a few agents to get a market analysis to see what your current house might sell for. It might be better or worse than you think.
Even in a good market, which this is not, it is hard to coordinate the sale of one with the purchase of another. I think you need to speak with agents and lenders to get more info so you have a better idea as to what your options are and how to proceed.
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April 09 2012
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I currently do all my own budgeting/taxes so could I talk to any old accountant about how the lose impacts my taxes?


Also, I am looking for a realtor in my area so if anyone has experience with selling properties at a lose and how to deal with banks send me your contact info.


Thanks everyone!
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April 09 2012
Hi,
You are in an enviable position. You have the money to sell it short and will be able to purchase something more valuable in a market that has experienced a huge decrease.  Depending on where you live, you may be surprised at what your condo sells for.  Here in Northern Calif, properties for sale have seen increases since hte first of the year.  I suggest you speak with your accountant to see if you can write off the loss on your condo or how the sale will affect you.
Good luck to you,
Suzanne Looker
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April 09 2012
You could offset the loss by making a really smart purchase, but you could also lose equity on the new purchase in the coming months.  Not all markets have bottomed.  Make sure you are very confident that yours has before counting on it. 
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April 09 2012
 
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