by Donna Stott, Your Coaching Matters

Owners who have property in the United States have up to EIGHT options for what they can do with that property.

Present this list and assist them in clearly understanding the pro’s and con’s of each option.

  1. Keep the property, make the payments and live in it.  If you’re doing that now, great.
  2. Keep the property, make the payments, and rent it out.  If it’s been a rental, you can choose to keep it one. If it’s been your primary residence and you want to turn it into a rental, talk to a property manager and your CPA about what that will mean for your cash-flow and tax status for the property.
  3. Keep the property , make the payments, and maintain it vacant, or use it part time as a second home/vacation home. Again, talk to a property manager and your CPA about what that means to you.
  4. If you have equity, sell the property. Price it well and sell it now. You can do this in most markets. Homes are selling if they’re priced correctly. Note that your competition for buyers is Banks (REO), Short Sales (combined Owner and Bank), and other desperate sellers with equity.  You must price it with that in mind to sell in this market. Period.
  5. If you don’t have equity—sell the property and bring money to closing to do so. Note the pricing statement above.
  6. If you don’t have equity and don’t have cash, sell the property via a Short Sale if your bank will approve it.
  7. Do a deed-in-lieu of foreclosure if your bank will approve it.
  8. Allow the bank to foreclose on the property.

Note #1: Options 1-5 don’t damage your credit. Options 6-8 do to varying degrees.

Note #2:  There is NO OPTION to price the home higher than it’s worth. It’s the same as option 1,2,3, or 8.

Note #3:  Why would someone do Option #4 or #5 in this market?  Several reasons:

  1. They have to. Divorce, Estate, Job Transfer and option 2 or 3 is not good, etc.
  2. They want to and have the financial ability to take the loss.
  3. They want to buy another property and will MAKE UP THE LOSS ON THE PURCHASE.

Really smart owners know that this is the time to sell and buy and take advantage of the market. Here’s a quick example:

Seller A bought in 2001 for $250,000. At the peak of the market, his home was worth $375,000, but now it’s worth $200,000. He’s lost $175K from the peak and $50K from the purchase date.

Seller B bought in 2001 for $400,000. His property was worth $600K at the peak but is now worth $320,000.  He’s lost $280K from the peak and $80K from his purchase date. If he doesn’t, he loses nothing right now. You don’t gain or lose if you don’t buy/sell.

Seller A sells his home today. He loses $175K of what he could have gotten. He buys Seller B’s home for $320K.  Note that Seller A is now gaining  the $280K that Seller B lost.  So he’s AHEAD by $105K.

Let’s pretend the market improves 20 percent over the next four years.

If Seller A didn’t sell and still owns his home, it would now be worth $240K.  He’s gained $40K from today’s value and it’s almost up to what he paid for it.

However, if  Seller A had sold and bought in 2011, the new home would be worth $384,900 at the same 20% increase. He’s have made $64K.

By selling low and buying low, Seller A is actually ahead by $105K plus $64K by taking ACTION in 2011.

Selling now and buying now can be one of the smartest real estate strategies in 2011.  See how your owners’ numbers work out with a similar analysis.  Substitute ANY % that make sense for your owners and your market.

Isn’t this the kind of Coaching YOU need to move your business forward? Let us know how we can be of service to you.