24 Nov If You Own A Home Then You Are Probably Upside Down In The Property.
In an article this week featured in Default Servicing, Carrie Bay reports that one in every four homes is upside down. Upside down means you have absolutely no equity in your home. For example the principal amount due and owing on the mortgage is $100,000 but the property value is only worth $90,000. In this example your property value would have to regain $10,000.01 to have any amount of equity. The five heaviest states that are suffering these upside down properties are Arizona, California, Florida, Nevada and Michigan. However the upside down nature of the real estate market can be felt nationwide.
Inflated appraisals, the recession and over extended debtors provided the perfect environment for the bottom to fall out in housing market. As of today the crisis is not only hitting us every day folk but for the first time it is hitting the rich and/or famous. Rob Lowe sold his home in May 09 for $7.3 million dollars after originally listing the property for approximately $18 million. Jeff Lewis of Flipping Out reality TV spends all season talking about the down turn in the market and underwater properties. Even the kids from Million Dollar Listing are upset because their million dollar listings are not panning out they way they used to.
Remember the saying that if life gives you lemons you should not be sour but rather make lemonade? So what exactly is your lemonade in this market? If you are buying in this market you can afford to be picky. Everyone from builders to bankers to the people listed above are looking to unload their properties and are willing to take a hit in order to make this happen. This means that you can pick up a property for a reasonable price that before you might have not been able to afford. You are going to get a lot more bang for your buck in this market and afford to pick a house with more amenities.
Let’s say that you are not purchasing a home but already own one. Then this may be a perfect market for you too if you are considering filing bankruptcy. In the first scenario let’s say that you considered in the past filing bankruptcy but the value of the home prevented it. This would occur when the equity of the home was above the exemption limit. This non-exempt equity generally meant that the debtor would have to pay the amount of non-exempt equity to the trustee in order to receive a discharge of the remaining debts. Now those non-exempt equity homes are probably either upside down with no equity or very little equity that falls within the acceptable exemption amount. Bottom line, you may now consider filing bankruptcy to discharge debts that you can no longer pay while keeping our home.
Another scenario is when you have two mortgages against the property. In the bankruptcy court you may be able to strip or remove the second mortgage on the property. David Leibowitz provides a more detailed explanation but basically the process is if the value of the property is less than the first mortgage you can remove the second or more mortgages through the bankruptcy court. If you remove the second mortgage your equity recovery time will be reduced. This might just be the fresh start or leg up that you need to get back on track financially.
If you want to learn more about the options available to you in this current market visit a bankruptcy attorney in your area.
Remember that knowledge is power and the more knowledge you have about your options in bankruptcy relating to your mortgage the more power you will have to protect your real estate investment.
Written by Kansas City Bankruptcy Attorney, Rachel Lynn Foley.