Real Estate Incurables - Part 3

The third option to consider if you’re struggling to sell your home, as noted in our Part 1 entry on incurables, is renting.

Probe

The realtor’s first responsibility, when a client considers renting as an alternative to selling, is to help the client clarify their goals. If the homeowner is in a position, financially and otherwise, to wait until prices are on the rise, then renting is certainly a logical option.

Cutting Off Your Nose…

Often, however, such a decision is made while engulfed in the emotional frustration of an unsuccessful sale without really thinking through the repercussions. Hence, decisions to rent are made out of anger and the homeowner ends up “cutting off their nose to spite their face.” Since 2007, when the rhythm of the real estate market changed, we have had a number of clients make the decision to rent “until the market improved” only to realize that it wasn’t really in their best interest to do so. Consequently, they placed their home back on the market after renting for a year and sold it at a lower price than they would have the previous year.

Some Considerations to Selling vs. Renting

The realtor who fails to have an open, honest and insightful discussion with their client essentially absconds their responsibility. Some things to consider for any homeowner who is weighing the option of selling vs. renting:

1. Can You Afford to Rent – How much of a loss can you afford to take if the rent doesn’t cover the monthly mortgage payment?
2. Can You Afford to Sell – If your home is worth less than your mortgage, do you have the cash at closing to satisfy the loan immediately?
3. Tax Deductions - If you need additional tax deductions, you may be able to write off the loss and costs from rental properties.
4. Is a short sale, whereby you sacrifice your credit score for years, a viable option?
5. Time Constraints - Do you really have the time to attend to all the nuances that are involved with being a landlord?
6. Will you rent your home furnished or unfurnished and what are the consequences of each?
7. Wear and Tear – One thing you can be sure of, it’s unlikely that a tenant will care for your home the way you do, and the wear and tear that he or she places on your home is likely to negatively affect its value.
8. Cost – Be prepared to spend thousands of dollars on repairs upon the expiration of the tenant’s lease.

The bottom line is that, unless you are truly in a position to rent your home until prices in your area begin to climb – whenever that may be, renting is a risky business.

Written by Al N. Filippone. For more information about the local real estate market, call our Darien office at 203.655.5358 or visit our website at afahomes.com.