Homeowners Choosing Between Walking Away, Selling Short

Walk away or sell it short?

That’s the dilemna millions of homeowners are faced with, but some real estate experts say walking away for short-term gain, can in the long term do serious damage to your credit.

One would be hard-pressed to find many new homes being built in the Coachella Valley.

In fact, one real estate expert said that considering the market today, cities like Palm Desert overbuilt.

But there is still demand for housing, even though millions out there are exploring all available options to get out of their mortgages.

“Very few of the clients we represent chose to walk away from their property,” said Brady Sandahl, with HOM Real Estate Group in Palm Springs.

Walking away can possibly carry serious tax penalities and damage to the homeowner’s credit, according to Sandahl.

12 million Americans owe at least 25 percent more than what their home is worth. That’s one in four homeowners.

Sandahl said selling short is a more beneficial option.

“Sixty percent of the market is still with equity, which means that 60 percent of the sellers closing their properties are closing with cash in their pocket,” said Sandahl.

In the second quarter of 2011, some 3.6 million homeowners were either 120 days delinquent on payments or already in the foreclosure process.

But the news isn’t all bad.

The number of homes available on the market is down by about 200 in the Palm Springs area, according to Sandahl.

However, the buying demand is still constant.

“The average sales time has reduced from around 120 days to as low as 60 days, meaning inventory is being absorbed faster,” said Sandahl. “That’s great news.”

“(I) bought this in 2004. It should be worth more,” said Frank Alvarez, who lives in the Palm Springs Movie Colony, and is also a real estate broker for Greater Palm Springs Realty.

Despite the gloomy market, he said investing in his house and making improvements was the best decision he could have made.

Property values are maintaining in well-established areas.

Homeowners underwater are choosing not to walk away. Instead, they are staying in their houses rent-free, while at the same time still maintaining the home and the look of the neighborhood.

“Many of these people in these neighborhoods that are more established didn’t use their house as an ATM,” said Alvarez. “They didn’t suck out the equity and they’re not upside-down in their properties nearly as much as in areas where there was a lot of overbuilding, such as Desert Hot Springs, parts of Indio and Palm Desert.”