5 Ways To Unload Your House

Need to sell your place, but the market is not cooperating? There's no magic potion to escape unwanted homeownership, but there are alternatives. Here are Five:

March 01, 2009|By Andrea F. Siegel | Andrea F. Siegel,andrea.siegel@baltsun.com

1

Short sale

The route of choice for an owner seeking to stave off foreclosure, a short sale is one in which proceeds fall short of covering what's left on the mortgage. The lender must agree to accept less than what is owed. An inability to make up the difference by selling other assets makes a short sale suited to someone at the end of his financial rope. What's in it for the lender? It's out of his hair.

"The loss is absorbed by the bank," said G. Russell Donaldson, whose Crofton law practice includes a lot of short sales.

FOR THE RECORD - An article in Sunday's Real Estate section misspelled the name of the consumer operations manager with the Fair Isaac Corp. His name is Barry Paperno.
The Baltimore Sun regrets the error.

The process is slow - six months is not unheard of. Second mortgages and home equity loans can complicate the deal further, since lenders, investors and others have to sign off on it. That can be a plus, giving you time to plan your exit, or a minus, threatening to take so long that a buyer finds another house in the meantime.

Pros: : "It is an ideal scenario for the person at the end of their means," Donaldson said. You can negotiate forgiveness on some, ideally all, of the debt. Donaldson advises consulting with a lawyer and financial guru, since, under Maryland law, the lender can come after you for the balance of the loan.

A buyer, knowing it's a short sale, may see it as a good deal.

Cons: : "You have to have a patient buyer," said Aaron Rice, a Keller Williams agent who specializes in distressed properties. Your credit score is likely to take a hit because lenders generally won't begin short sale talks before you've missed payments, Rice said. Also, if you plan to rent afterward, make the arrangements before skipped mortgage payments negatively affect your credit. Landlords do check.

2

Rent it

This can work if you don't need (or have) equity to pull out for another home purchase.

Whether you use an agent or find a renter on your own, make sure to have a thorough contract. Check references, and check with your local government to learn if you need a rental license. Talk to a lawyer and accountant about legal and financial aspects of becoming a landlord. If you're leaving the area, consider hiring a management firm.

You can also offer a rental with an option to buy, in which the lease includes the percentage of the rent that goes toward the down payment.

Pros: : The house is occupied. You may not lose money.

"I kind of did the math," said house-hunting Dave McIlvaine Jr., a Keller Williams agent who wants to move but would take a financial hit on selling his Elkridge condo. Even though he won't recoup his full mortgage and condo fee, McIlvaine said, renting will allow him to move, and he probably won't take a hit on his taxes.

Rentals are investment properties, allowing you to claim losses and depreciation on your taxes. How each person fares varies, said Baltimore accountant Barry Weiss.

Cons: : Your house may not rent immediately, or at all. Also, it may suffer wear and tear, even if the renters are responsible. If this is not a lease-purchase, you will have to ready your home again for sale or rental.

Another concern: "What happens if the person flakes on the rent for a month or so?" said McIlvaine.

3

Raffle it

This is for people who can endure months of ticket sales. The market could rebound before you reached the magic number with $1 tickets, which is why house raffle tickets are generally in the $50 neighborhood. The fine print allows extensions on the drawing in case of slow sales.

And in Maryland, you must have a charity partner to stay within the law.

Pros: : You're tapping into another part of the market, and probably will receive publicity while waiting.

Cons: : "Raffles are really hard to pull off," said Guy Cecala, publisher of Inside Mortgage Finance in Bethesda.

4

Auction it

Auctions are not only for estates, foreclosures and white elephants. They're for ordinary houses, too.

Bidders come for bargains, but also are prepared to buy. An auction can sell the house to the highest bidder, or the sale can be subject to seller confirmation of the highest bid, or the minimum you'll accept is advertised, said Randy Wells, president of the National Auctioneers Association and owner of Realty Auction Services in Post Falls, Idaho.

"Many times you are not going to get anything better than if you did it with a regular sale and agent," Donaldson said. Auction companies charge fees and if your bottom line is not competitive, the auctioneer may turn down your business.

Another possibility: the auction combined with a multiple listing. The house is on the market, with an auction scheduled.

"It gives it some urgency," said Paul Cooper, a vice president and real estate agent with Alex Cooper Auctioneers.

Pros: : You may get your minimum or more, and the quick turnaround minimizes holding costs. An auction may take place a few weeks after you ink the auction contract, with closing within 30 days. "It allows them to pick the day the property sells," Wells said.

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