Please Help!!! Sell or Refinance?

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OCTrojan_IHB

New member
<p>My fiance (soon to be husband) and I bought our first home(condo) in Quail Hill in November 2005 on a 100% financing, 2 year ARM with a hard prepay. We both had BKs which forced us into the loan program and wanted to enter what appeared to be an ever appreciating real estate market. In hindsight, this was a very poor decision. However, we have some tough decisions to make:</p>

<p>1) Do we refinance when our prepay is up, or,</p>

<p>2) Sell the home </p>

<p>Issues with selling:</p>



Since we purchased the home with zero down and the market has not appreciated, we may take a loss

If we list now and find a buyer, we can not move out until our prepay is up on December 1

If we don't find a buyer in time, we will need to refinance anyway and availibility of 100% programs is very minimal

If all the stars are aligned and we can sell the home with a break even, do we buy another home or rent

>

<p>We are both young professionals with excellent salaries. With the burden of paying for a wedding behind us and healthy savings accounts, we want to make the right financial decision with the home as we begin our marriage.</p>

<p>Thanks in advance for your input!</p>
 
<p>A few options that come to mind. </p>

<p>1) put it up for sale and if you're successful, set closing to coordinate with the hard-prepay date and rent from the buyer through closing.</p>

<p>2) is this somewhere you want to stay? if so, come up with 5-10% down and I suspect you could find a loan program that would work for you</p>

<p>3 Compare your cost of renting vs. continuing ownership of this home or perhaps another. </p>

<p> </p>
 
I believe the reset rate would be approximately 10%





We can come up with the 5-10% down, however, the comments on this site lead me to believe that this is a horrible time to buy. If we're successful with the sale (which I do not anticipate), we were considering renting for a year or two.





If we rent back from the buyer, we would be paying both our mortgage and rent...is that correct?





Thanks again!
 
<p>OCTrojan, </p>

<p>I sense from your comments that you don't think you'll be able to sell your place. If that's the case and you have to end up refinancing anyway, a 5-10% down may ease your mortgage payment a bit, and could be cheaper than renting? But the downside is that you will have sunk 5-10% equity into the home which you may not recoup. So, it gets back to, do you really have any options other than trying to sell and if unsuccessful, have to refi. If you can find a 100% LTV, then you're good but I highly doubt that now.</p>

<p>Yes, you'd have to double up on rent and mortgage for a few months but as they say, a bird in the hand ....</p>
 
<p>Sounds like you have a subprime loan. I am sure you have heard about banks resetting subprime loans to low fix rate. Why don't you ask the bank for this option.</p>

<p>Prepay is very expensive, if your house closes escrow any time before December, you will get stuck paying pre-pay. So you should not sell yet.</p>

<p>Is your current rate 7%? Can you afford 10%? If you refi with the same bank, your pre-pay may be waived. Get this on the contract.</p>

<p>The good news is, I think the home price has bottomed out. So if you sell now, you may have to pay higher price later.</p>

<p> </p>

<p> </p>
 
<p>"The good news is, I think the home price has bottomed out." </p>

<p>HUH?? !! </p>

<p>If I have taken anything away from this site it's that home prices are no where near the bottom. They were even discussing this today on AM 790 KABC! Am I misunderstanding the quote above? I sure hope so.... let's keep the number of "Bagdad Bob" comments on this site to a minimum.</p>
 
<p>GrewUpInIrvine,</p>

<p>As crazy as it sounds, prices actually bottomed out in November 2006. 3-6 months from now, the picture will be clear of what today is. Builders are planning increases from a long reduction in production; which is telling me we just hit the break point.</p>

<p>Home prices in the high end sector just hit peak. Low end homes will soon follows.</p>
 
<p>"The good news is, I think the home price has bottomed out"</p>

<p>"News" and "I think" don't go together (unless you consider your loud thinking - "News" ).</p>

<p>Pl provide evidence/logic to support 'bottoming out' theory. As far as I can see the home inventory, defaults in Irvine/OC are going up.</p>

<p>IrvineRenter and others have taken great efforts to support their theory of price decline in next few years. </p>
 
<p>NIR-</p>

<p><em>"Home prices in the high end sector just hit peak. Low end homes will soon follows."</em></p>

<p>What does this mean?</p>

<p>Don't you realize the prices are just beginning to drop?</p>

<p>SCHB</p>
 
The majority seem to think that prices are still declining. If we are successful in selling our home, would you recommend renting? Our mortgage is $4200 for a 3br/3ba condo. Does anyone know rental rates for something similar in Irvine?
 
<p>Ok everyone, hopefully some of the 12 pound brains will weigh in (not me)... this is what I know:</p>

<p> Everyday, the internet news websites are full of stories that talk about "Subprime Crash!", or, "Hounsing Starts at several year lows!", or, "Inventories Up," etc.</p>

<p>Then I check out the blogs. Everyone is a BEAR.</p>

<p>Then I listen to AM talk radio. Increasingly the stories are that the home market is on its way down. Even today on KABC AM 790, there was a 1/2 hour segment about OC home prices being "on their way down."</p>

<p>Then I look at legislators starting to worry about the possibility of bankruptcy bail outs...</p>

<p>Then I look to my own experiences (in the last 4 months) where a home I was about to purchase went down in price over 85K!</p>

<p>Then I look at other home builders, and they are starting to (1) back out of developments, (2) drop prices, and (3) reduce the size of "released phases" as a way to limit volume on the market.</p>

<p>All of this says to me - everyone in the world thinks things are on their way down. The media, the builder, the buyer, the state... everyone but the NAR.</p>

<p>The housing market is not an auction, nor is it even like the stock market. Prices movements are far slower and react with the speed of an ocean liner trying to make a pin point turn. There are ups and downs, but they take quite some period of time to work out. So, I look for historical context - I look to the last CA housing market down-turn in the early 90's. The downturn took approximately 3 years to reach botton, and 5 more, to even back out to pre-drop levels.</p>

<p>Finally, I look at the psychology. Just the other day on the ABC evening news, some 70% of americans believe that we are either in or on our way to a recession... not exactly the best financial circumstances for a housing market trying to pawn off 600K condos, and 1.3 million dollar SFR's. I'm sorry, but my household income is 200K+ (no I have nothing to do with real estate, mortgages, or investing) and I KNOW by simply discussing the market with my peer group (others making similiar money), that there are simply not enough human beings willing to take on 700K mortgages (let alone be able to afford them) to buy these million dollar detached condos.</p>

<p>So, yes, it does sound "crazy" to say that the market bottomed in Nov 2006. You can only pump so much hot air into a balloon before it "pops."</p>
 
<p>DBS,</p>

<p>Data will come out after the fact. If data were available, OCTrojan would not have bought. BTW, OCTrojan, did you graduate from USC? Your 3/3 home in Quail Hill is renting for $3,000 - $3,200.</p>

<p>There are 2 groups of people in the housing market: in-the-market, and NOT-in-the-market. For some reason, this blog is not able to attract the group "in-the-market"; I feel like I am the only one. In another word, we are not on the same page; therefore, I do sound like a complet idiot. I can totally understand you point of view if I am not in-the-market of buying. </p>

<p>And I do want to say, this is a great buying opportunity if you are in the market for a brand new home. You are getting a brand new house from the builder at the same cost as a resale ones (I have taken in account of upgrades and landscaping). This opportunity will not last long.</p>
 
NIR,





I admire your persistence in the face of all of us housing bears. A poster with less fortitude would have left the board feeling like they were driven out. We are unappologetically bearish, and we will probably continue to express opinions opposite from yours. We are not beating up on you as much as we have a consensus of disagreement. Unfortunately, that is your fate here. It isn't likely we will change our outlook in the foreseeable future.





OCTrojan,





You mentioned that a BK put you in to buying with a sub-prime loan. Be careful what you do with any sale or loss. If you end up with debts you cannot repay, you will have to wait until 7 years after the last bankruptcy to declare again. The debt collectors can hound you for a very long time, and there isn't anything you can do about it.





My advice to you is the same as others who have asked about selling or holding on: SELL. Get out while there are still people willing to pay somewhere near your purchase price. Minimize your losses. The longer you wait, the more you will lose. Particularly if you cannot afford the payment reset, you need to sell now. Do you want to live in this unit for the next 10 years eating Ramen noodles? Don't get trapped. Sell and rent for at least 3 years. Ideally, you should rent and save until the last BK falls off your credit reports. You will get a much better rate on a home loan then.





If you need a realtor to help, I suspect nirvinerealtor would be delighted to list your condo...
 
<p>NIR - Sometimes your comments do provide insight and worthy information and I like irvinerenter admire your persistance in coming back to the bear cave. Sometimes your comments are incoherent, non-sensical and rather ignorant. Some who post here including myself happen to be "in the market". It may appear that the majority are not because they do not share the same bullish opinion of OC's housing market as yourself doesn't mean they are not "in the market". Your comment of "the people in the market" comes across as arrogantly elitist as if the people "in the market" such as yourself are better than us bears. This is the attitude that pressured people like OCTrojan to feel as if they had to get in before they would be priced out entry level home. When in fact it would have been a better financial decision for them to have waited for their BK to be gone from their credit and saved up even more money for a down payment for a place that is now lower in price. </p>

<p>Now as for homebuilders picking things up as reporting season has shown this is not the case. From DR Horton today they started half the homes from the last quarter and they remain flat. Their CEO Tomnitz said that "California is a tough market, laughing, to be politically correct what we need to do is lower our price. Affordability became the issue when it went from 30% to 11% and we will simplily have to lower our price to make homes more affordable. Since we have higher profit margins we have more room to move down", "The housing market is not stabilizing", "Impairments will continue.", and "Continued weakness in 2008." 80% of their writeoffs and impairments were in California. California was the only market that they lost money in. "Rock bottom pricing in California." "Affordability is at a record all time low." I know you don't like data but you really should have some clue as to what the builders are really doing and saying. Go here <a href="http://phx.corporate-ir.net/phoenix.zhtml?c=67920&p=irol-IRHome">http://phx.corporate-ir.net/phoenix.zhtml?c=67920&p=irol-IRHome</a> and listen to the conference call because you can't make these things up. Last quarter he said my favorite line ever "This year is going to suck."</p>

<p>Goldman Sachs had this to say about California: "With fewer subprime loans available and more delinquencies likely, California home prices will probably weaken further in 2007, the analysts said."</p>

<p>A quote today on the transition of the economy from Fred Mishkin governor of the FED: "Another source of the rebalancing is the substantial correction in housing markets that has been under way since last spring as the unrealistic expectations about home price appreciation that fueled the extended boom in homebuilding have been unwinding."</p>

<p>I highly recommend you take off the rose covered glasses or cut back on the kool aid because there will be many more in situations such as OCTrojan's. </p>

<p> </p>
 
<a href="../../../account/155/">nirvinerealtor</a>,





I understand what you are saying. The next few years will be a rare opportunity to get into a new OC home and have plenty of options to choose from. Unfortunately, I do not see the market bottoming out yet because we just lowered the price of one of our projects by over <strong>$30k</strong>. That only put our Plan 1 into <em>comparable </em>pricing with the surrounding projects... not even close to aggressive competing range. If things don't pick up, we already have Plan B; drop our homes another <strong>$25k </strong>to beat the other builders. Phase 1 buyers would have just lost $55k in equity and immediately upside down on their 100% loan. All they had to do was wait 5 months to get the lower pricing...





Obviously, I can't disclose who I work for. Although I respect the company and the work we do (build new homes and redevelop communities), I would like to buy my own home one day and this job gives me an insider view (micro) of the market.





In my briefcase is a copy of the <a href="http://www.ryness.com/p-the-ryness-report.htm">Ryness Report</a> detailing the sales activity of 44 projects in Orange County (e.g. Portola/Woodbury residences, Avenue 1 Columbus Grove, loft projects, ect...). It was a very sober meeting as we poured over data that looked like this:





<u>Week ending April 8, 2007</u>


Total number of traffic: 2,858


Total sold: 20 (after 10 cancellations!)





^ That was OC. If you look at the Antelope Valley or other Inland data, the numbers are even grimmer. To us builders, it is a bloodbath <u>right now</u>. And unless you are forced to buy a home right now, let me give you advice from a builder and real estate investor, "<strong>It is a horrible time to buy right now.</strong>"
 
<p>OCTrojan - I apologize for hijacking your post with my diatribe above but I felt that I had to add some reality. I second the opinion in getting out if you can the sooner you can to avoid any further losses in value.</p>

<p>However if you really want to keep the home then I have some questions for you. When were the BKs discharged and how does your credit look today? If your credit is in the high 700's and the BK is gone or over seven years old you still may be able to refinance. I recently spoke with a friend a mine who is an appraiser and he said that because there have been very little sales getting comps is difficult and sometimes the values come in as expected. Now I do not really agree with this and he isn't one to push the numbers but as long as there haven't been that many sales at a lower price it could be higher than you expect. So you could maybe do a refi at 95% LTV but 100% refi's are gone. If this is the route you take the sooner the better because it looks as if "A" lenders are starting to lower LTVs in declining markets such as OC. </p>

<p>The other option you have is the really good point nirvinerealtor made is to talk to your lender and see if they can redo the note rate. If you run into problems with the clueless customer service rep just move up the ladder. If you have made all your payments on time they should be more than happy to do this. The loss of redoing the loan note rate by selling the performing loan on the secondary market $.95 on the dollar is much better than the loss of a short sale and extremely better compared to a foreclosure. If this is the route you take you should be very demanding as to what need because you are now in the driver seat. Especially if you made your payments on time and I would remind them of this over and over again. </p>

<p>As I continue to listen to the DR Horton conference call I am amazed at the continued point of affordabilty and the need to lower price over and over again as being the main issue. I think it is important to listen to the CEO of the largest homebuilder in America. </p>
 
<p>raymond,</p>

<p>Ah, you are in the same line of work that I am in. I am glad to see this. </p>

<p>I do see an absolute need for builders in PS, CG, and CS to lower prices to compete with the resales homes. Your new pricing just beat resale pricing; however, your location is still behind in the race. </p>

<p>That being said, resale is still perceived as better value so you might have to further price reduction to clear all your inventory. Taylor Woodrow in PS just offers broker coop, I think is a great move. Personnally, the incentive does not motivate me at this point as I sell what I truly believe in; I would if the price improves. I appologize for making this statement. Most folks here are bears so I hope my statement here is not damaging to your business.</p>

<p>In the resale sector, there is a huge shortage for high-end homes as buyers are moving-ups. My buyers are waiting impatiently for homes to come on the market. Bidding wars are going on for any decent homes. </p>

<p>Buyers in Irvine are very different; I rarely have to discuss affordability. Cash buyers are somewhat typical.</p>

<p>Ochard Hills has great location. I am looking to buy there at any price for my family to live-in. Could you help getting me in the focus group $1.5M+?. My e-mail: <a href="mailto:nirvinerealtor@gmail.com">nirvinerealtor@gmail.com</a>. I appreciate your help.</p>

<p>30% cancellation; not bad at all. Looks like you are moving in the right direction.</p>
 
<p>OCTrojan,</p>

<p>In May 2006, I helped someone with a 100% financing subprime loan in your similar situation to unload his home. Initial interest rate was 7.5% for first and 11% for second. After 2 years, the first rate would be 13%. </p>

<p>We went ahead with selling because the house appreciated 7% and the owner could not afford the anticipated $7,000 payments on a $700K condo. I was able to negotiate 50% reduction in pre-pay penalty but it was a lot of work on my part. </p>

<p>You really need to interview a few agents and get them to figure out what to do with your situation. Good luck.</p>
 
<p>graphrix,</p>

<p>I am interest to hear your current buying experience. </p>

<p>I appreciate the feedbacks from you and IrvineRenter and I promise I will do better. Please understand I am talking about Irvine. I also sell in other cities, which I am not singing the same tune.</p>
 
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