By Kay Wilson-Bolton
December 8, 2008
Before anyone decides that owning a home with no equity is a bad idea, please stop and think about what not owning it means.
What a mess this seems to be. Scenarios of stress and surprise are everywhere. We must look at what is ahead of us, not just at what is in front of us. Anyone who talks to other people during the day, needs to take a role in encouraging others, consoling them and being generally kind. None of us knows the depths of despair and confusion that others are shouldering.
It seems natural to balk at the idea of owning a home that is worth less than what you paid for it. In the short run, that is problematic, but only if you need to sell it. If you can afford the payment, my advice is to hang on to it. Dumping it into the pool of unwanted properties will not solve your problem and it will make the problems of others even worse.
You will lose your mortgage interest deduction and pay more income tax, you will have to move which disrupts the family and your pets, and you will become among the new army of renters who will make someone else’s mortgage payment.
A recent article noted the stress of a family whose home dropped dramatically in value in the last 12 months. However, they noted that they live in an area they like and near services they enjoy. My view is that this sounds like a happy family and that staying put, as long as they can afford the payment, makes sense.
It is unknown how long foreclosure victims will bear the scars on their credit report. In the last downtown of the 1990’s, buyers were able to purchase another home within two years of a foreclosure.
It is possible that this environment has created a new, forgivable trespass and that purchasing another home in a short period of time will be possible—as long as they qualify for the loan.
To date, corporate sellers have been unwilling to resell a home to one related to the one lost it. There is a new question on many broker price opinions as to whether or not a sale was “arm’s length.”
It is not uncommon for couples to purchase a home under only one name, likely the one with the strongest credit score. After the foreclosure, the other mate has tried to repurchase the property.
While it sounds like a clever idea, the broker representing the bank/seller better make that disclosure if it is known to him/her. Banks take a dim view of this practice. In one case, a couple paid $800,000 for their home in 2003 with a lousy loan product and gave up the home in 2005.
That same home is now being offered at $550,000 and the other mate wants to purchase it under his name alone. Let the bank decide if their policies allow it.
This is the season for celebration, not for spending money. It is a time for families to rethink our values and focus on them. A great opportunity is being presented to every one of us and that is to shed the notion that we can buy anything we want or that we believe the media’s messages about what we need.
Life may not easy now for some, and it is going to get easier any time soon. Make a list of the good things in your life. Place it on your refrigerator and let it be the daily reminder of what is really important. You and your family will fare this season better.
Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista with offices in Ventura and Santa Paula. She brings a regional perspective to local issues. She can be reached at 805.340.5025. Her web address is www.readysetkay.com