The housing market in the U.S. is having a meltdown. Last night’s edition of Nightline talked about the bad news. The National Association of Realtors reports the worst month-to-month drop in existing home sales since they started keeping track in the late 90s. Closings are down more than 25%. That’s a 15-year low.
It’s not over yet either. So let’s say your house is for sale, it’s not selling and you’re running out of money. You have options. Economist Dean Baker talked about the various options – here are 5.
1. You can find someone to tend your house until it says (and charge them low rent in exchange for maintaining the home until it sells). It’s called home tenders.
2. You can rent out part of your home to make income that will help pay the mortgage. The problem with this solution is rental rates aren’t great either. So you’ll need reserves to weather a few months worth of mortgage saved to cover gaps when you can’t find renters.
3. Walk away and let your home go into foreclosure. This isn’t such a good idea because it will hurt your credit for a long time. That can hurt your chances of finding a new job, financing a car or a future house.
4. Arrange a short sale. This is a popular option right now. The bank buys the house at market value and you get to walk away. Of course it’s not quite that simple (you might still owe on it), but it likely won’t hurt you compared to foreclosure.
5. Baker suggests another option. That is that banks let homeowners rent back their own home for up to 5 years – until it sells. Not a lot of detail about how that would work, but it’s clear that many of us are looking for options.
However you look at it, homeowners in this situation are not alone in their plight. Many are facing some difficult decisions. We hope to help you through the process if you decide you want to do a short sale.
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