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Underwater on your Home?

by Karen Picarello


One of the scariest things for a homeowner to face is the possibility of being underwater on your home loan. This means you are on a situation where you owe more for the house than the house is currently worth. During the most recent housing crisis, this unfortunate situation became the reality for a large number of Americans. Thankfully, as the market has improved since then, the number of people in this situation has declined. However, there are still individuals who are struggling after finding themselves in this position. If this is you, here are a few options you have.

  1. The most obvious action to take is to stay, keep paying, and hope that the value of the house improves. If you can make it through the period where the house is worth less than the loan, you can avoid potential credit consequences, and also end  up not losing money on the home when you do sell it. There can be negatives here though. If the property does not go up in value, you may end up in a financially untenable position for an even longer period of time.
  2. Refinance. While classically it can be difficult to refinance if you have negative equity, there are some options. The federal government implemented HARP, or the Home Affordable Refinance Program during the recession, and there are still some people who qualify, despite the fact that it was initially intended to end fairly quickly. Depending on when you got your loan, refinancing may not be completely out of the question.
  3. The third option is a short sale. This refers to selling the house for less than you owe. While this can be an unpleasant reality to face, this can allow the homeowner to drastically reduce their debt, and move forward into a situation which is affordable for them. If you can move into a place where you will be more financially stable, and you need to solve your debt issues quickly, this can be your best option. Additionally, this might be the only thing which saves you from bankruptcy or foreclosure.
  4. Finally, you may be forced into one of these options. Bankruptcy or foreclosure are sometimes incredibly difficult things to get through, but are sometimes the only option. If you are at the point where this might happen, consulting legal help is often the best choice. It isn’t pleasant, but it can be the thing which gets you away from an untenable situation.

Appraisal, what is your house worth?

by Karen Picarello

If you are entertaining thoughts of potentially selling your property, I'm sure you are quite interested in understanding how much money you will be able to obtain from the sale. Not only will this be critical in helping you plan your next move, but it also might determine whether you wish to go through with a sale at all.

A professional appraisal of the property can be a fairly reasonable way of obtaining a dollar amount, but potential sellers might shy away from this course of action for a number of reasons, which I will address later. If you want to get a quick estimate yourself, your best bet is by comparing your home to other homes which have sold recently in the area. Figuring out exactly what others have been willing to pay for similar properties is the most objective way of guessing what the market value of the home is, and appraisers and real estate agents will often use this method as part of their calculations. Ideally, you could find a house very similar to yours which is very close to yours, which has sold recently. However, this can be difficult. Not only will the two homes need to have similar square footage in order to be directly compared, but things like the number of rooms, (bedrooms, bathrooms, etc), amenities (pools, outbuildings, gazebos), and exterior space must also be similar. Finally, things like the condition of the property (electrical system, roof, plumbing) etc can all drastically affect how much it is worth. If many repairs are needed, the value can plummet. Therefore, if you really want to figure out how much you are likely to get for your property, contacting local real estate professionals is likely your best bet. They will be familiar with other sales in the area, and likely have a great deal of experience when it comes to obtaining realistic estimates of what an appraisal could come out to.

 

Hiring a professional appraiser could net you a realistic appraisal, but could also leave you with problems. If you are not adequately prepared, an appraisal could come in lower than you expect. This might leave lenders or potential buyers wary, and unlikely to offer the price you are hoping for. Additionally, you might end up footing a rather extensive bill, depending on their policy and the services rendered. Either way, if you are considering selling your home, call an experienced real estate professional, and start gathering information.

 

Competition for Property

by Karen Picarello

Things have value because we give them value. The only value intrinsic to a house is that people want them. If we are looking to buy a property, we can have a reasonable expectation that in 10, 20 or 30 years, people will still want houses, property, and that your house will still fit the bill. However, there are a few factors which go in to property sales that may reflect more than a simple assessment of what people are willing to pay.

One factor which can affect the price of a house are the regulations governing who is allowed to purchase the house, and what aid or penalties their purchase will fall under. For example, the American real estate market is often invested in by foreign entities. Recognizing the stability of the market, those with capital from other areas of the world seek to make investments in US residential and commercial properties. While someone selling a property might rejoice that this extra competition will drive up the price, there are others who might have different opinions. For example, Chinese investors have traditionally had a large presence in U.S. housing markets, particularly luxury properties. However, the Chinese government has begun to restrict this, seeking to stem the flow of wealth out of their country.  Alternatively, some local governments have put restrictions on foreign buyers, often passing regulation requiring properties to be inhabited, or putting the properties at risk of being taxed heavily.

This can be good for the locals however. While it initially might seem good that foreign money could prop up the home value in your area, it can also decrease the quality of life for those who stay. Property taxes could rise as the home value does, while empty homes owned by foreign millionaires sit unused for much of the year. This can hurt a community, as not only do empty homes attract crime, but also mean that you will have fewer neighbors with whom to engage. Many studies have connected happiness and fulfillment to community engagement, so taking away the opportunity to socialize could seriously impact your quality of life.

While it is likely that the global economy will only become more connected, it is still important that we stay aware of the trends which will impact us. Understanding the interests involved in real estate investing can help you to better understand the value of your own property, and can hopefully help you to make the best financial choices for your situation.

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TeamPicarello
RE/MAX Fine Properties North Scottsdale
21000 N. Pima Road, Suite 100
Scottsdale AZ 85255
Office: (480)860-8733
888-548-8713
Fax: (480)860-8755