My name is Brad and as a senior advocate at YouWalkAway, I am fortunate to speak with customers living in large cities and rural communities throughout the country. As I listen to their unique stories and learn more about them, one theme that comes across in every phone call is the LOSS OF EQUITY in their property. Since the housing bubble burst in 2008, home values have plummeted across the county by as much as 68% in some areas like Florida, Nevada and Arizona. And while other areas have seen milder depreciation, the simple fact remains; if you purchased or refinanced your home between 2004 and 2007, your home, most likely, is not worth what you owe on it.
The fact that you owe more on your home than what it is worth, means that you cannot sell or refinance the home without bringing the difference owed to the closing table. In some cases, this could be untold thousands of dollars. We see this every day when customers explain that they have 5/1 or 7/1 ARM’s that are coming due in the next few months. They know that their interest rate is going to increase and yet they are told by the lender; “sorry but we cannot help you”. Unfortunately, the home that was once a dream has become a financial trap. Leading up to this real estate “bubble burst” phenomena, the housing construction industry had been on overdrive for 10 years. Presently, there is an 11 month over supply of unsold homes on the market. As a result, the rental market has become very “soft”, allowing homeowners who were once strapped with unaffordable mortgage payments to be able to rent for hundreds and even thousands of dollars less.
On the website, www.youwalkaway.com you can find a calculator that will help you determine if it makes sense , on paper, to try and keep the home vs. strategically walking away, renting and then repurchasing a new home within 36 months of the foreclosure. This calculator provides you a graphical interface that helps you determine the time it may take to recover your equity loss and the amount of money you will save if you elect to walk away. Yesterday, I had a consultation with a customer whose scenario was as follows; they owed $300,000 on a home that was recently assessed for tax purposes at $250,000. They made a total monthly mortgage payment of $1765. Upon review of both a community rental resource and Craig’s List, they determined that they could rent a similar home for $1350 per month. Using the following interactive calculator; http://youwalkaway.com/output24/InterectiveFlashCalculator.html, we came to the conclusion that the home would not regain equity for at least 20 years. The graphical interface also indicates that over the next 5 years, the home owner would save $38,000 by renting, even after considering the tax reduction benefit associated with homeownership.
I have similar conversations with homeowners every day. In every instance, the homeowner is deeply saddened by the reality that holding on to a property that is “underwater” just does not make financial sense.
Brad Veach
Sr. Advocate
You Walk Away, LLC
760-931-5696 Office
888-200-3965 Fax
