This new reality complicates the sell-a-house/buy-a-new-house paradigm that has been the norm for relocated employees. Sellers are weighing their options, asking whether they should take what they can get in a market that may not be as generous as they would like, or hang onto their home and go into the landlord business, as they wait out a market they hope will improve.
The right decision depends on a lot of factors, the most important of which is a determination of what is happening in the seller's local market, said Mitchell Hochberg, principal of Madden Real Estate Ventures, which advises residential and commercial real estate developers.
"The real estate market is a very local market," he said. "The homeowner needs to look at the trends in selling to see where the market is now: how any houses have been sold, in what price range. Find out if your market has started to turn the corner, and what it looks like over the next couple of years."
He also suggests that sellers look at what is happening with the economic base in their town. "Is there a limited supply of homes?" he asks. "Is the community growing? When the market starts to improve, will new homes be built? You don't want to be a long-term holder, and if there are factors that will make your home harder to sell as the market recovers, you need to take that into consideration."
All this information can be gathered with the help of a professional real estate agent, said Hochberg. And all of it will help a seller determine whether it makes sense to hold onto a home or go into the landlord business.
Hochberg said homeowners should also keep these facts in mind:
Real estate taxes can have a big effect on the value of a home.
"What's happening in your area?" he says. "If real estate taxes are set to increase, the carrying cost of your home is going to go up and the value is going to go down." While this could make the home tougher to sell, it will also increase your costs as a landlord.
"Remember, when you are renting your home, you are responsible for paying the mortgage and taxes." If taxes are set to rise, will you be able to raise rent to keep up with the payments?
Upkeep on your home is a major expense.
Besides mortgage and taxes, a homeowner must think about maintenance of their home; this is especially important for those who want to be able to take advantage of an upturn in the market. Will the roof need repair, will the trees need trimming, or will the house need repainting? "The longer you hold onto your home, the more likely things are going to happen," he says. "You don't net-lease a house. You don't charge $3,000 a month for rent and pocket it all."
Consider wear and tear with tenants.
While Hochberg acknowledges that the best way to sell a home is to have someone living in it -- a good reason to rent your home until you can sell it -- you must also consider whether you can trust tenants to make the house look neat and tidy when it comes time to sell.
"You need to consider that you have strangers living in your home. Will they present the house in the best way possible? If they are slobs, it could hamper your ability to see the house."
Hochberg said that while the financial issues are a simple matter of putting pen to paper to figure things out, "the intangibles are more difficult to determine, and can weigh heavily against renting out your home, unless you feel that the market will come back in a relatively short period of time."
He pointed out that while you might be selling your current home at a lower price than you would like, "you will also be buying low in a new location."
And for those who are having a difficult time selling even if their home is priced right? He suggests that employees negotiate with their new employer for a bridge loan to get them over the hump of owning two homes: "Especially in more senior positions, where there is room for negotiation, employers are aware of the challenges people are having in this market, and will get involved in making sure employees are able to find a home."
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