Because I live in Arizona, many people have asked me over the last 2 years whether or not they should short sell their house.
And pretty much every time, my advice is generally the same:
It is up to you. But if you can afford your mortgage payments, there isn’t a rush – you will have that same decision in front of you for a while — it isn’t like property values are going to come back anytime soon.
And when I put it like that, many people say that I sound biased. But I am not really — I just illustrate that if they continue to make their payment on a $200k mortgage for a home that is now worth $100k, it is going to be the same decision when they decide to sell in 3,5,7 years — most likely.
Consider the story that 60 Minutes ran recently about Strategic Defaults:
The story was a pretty accurate look at what is happening right here in Arizona and I am sure many other parts of the country. But the part they left out was — what happens in 5 years? 10 years? Many of the homeowners who continue to make their payments will still be under water on their homes in 5 years and then end up short selling or being foreclosed on.
What should someone do if they find themselves in this situation? Well, it is an individual decision – but one thing is clear:
There isn’t any rush to make the decision.