Can I Sell My House if I Owe More Than It’s Worth?

Yes, but selling the house and covering what you owe on it are two different questions, and this year the market isn’t closing that gap the way it usually does. Home values nationally moved up 1.5 percent over the year to June, and lost ground against inflation for the thirteenth month running. In Tampa, they moved backward outright.

What Happened to Home Values in June?

S&P Dow Jones Indices released its June Case-Shiller numbers Tuesday morning. The national index rose 1.5 percent over the twelve months to June, up from 1.2 percent in May. Inflation over the same period ran 3.5 percent, and S&P’s own release calls this the thirteenth consecutive month home values have fallen in real terms.

Seven of the nineteen metros reporting a June figure were down over the year. Tampa was one of them, off 1.19 percent. Miami went the other direction, up 2.27 percent. Chicago led everything at plus 6.90 percent, and Seattle was the weakest market in the index at minus 1.95 percent.

Why Doesn’t “Prices Are Up” Help Me?

A short sale exists for one reason: the house won’t bring enough to pay off the loan. Whether somebody needs one comes down to the distance between what they owe and what the house sells for, and the usual advice to a homeowner behind on payments is to wait, because the market is supposed to close that distance on its own.

Over the year to June, the market moved the typical American house up 1.5 percent in dollars and down against the cost of everything else. Waiting is not doing the work people expect it to do. In Tampa, the market moved the typical house down in dollars too, not just against inflation.

What’s Happening in Tampa?

Tampa also has more short sale listings than anywhere else in the country. Realtor.com Economic Research counted 508 of them in May, ahead of Miami at 467, Orlando at 356, and Lakeland at 308.

Those are two different rulers pointed at the same place. Case-Shiller tracks the price path of the same houses selling again and again over time. The Realtor.com figure is a count of listings on the market right now. Neither one predicts what happens with any specific house, and both are reading Tampa the same direction this year.

Jacksonville isn’t in the Case-Shiller index, and neither is the rest of Northeast Florida. If you’re behind on a house in Duval, Clay, St. Johns or Nassau County, this data doesn’t reach you directly. The local numbers come from realMLS, not from a national index built around nineteen large metros.

So Can I Actually Sell?

You can always list the house. The question underneath the question is whether the sale pays off the loan, and that comes down to your actual payoff figure against what the house brings today, not what it was worth when you bought it or what a neighbor’s house sold for two months ago.

Start with the payoff, which your lender can give you and which almost always runs higher than the balance printed on your statement. Then build a realistic net sheet using what houses like yours are asking right now rather than what they closed at a couple of months ago, since closed sales describe an older market and asking prices describe this week’s. Only after that do you know whether your lender needs to be part of the conversation at all.

If the gap is real, the choices are the ones I laid out in full on August 19: catch up if the money’s there, sell the ordinary way if there’s equity, ask the lender to take less than the balance through a short sale if there isn’t, hand the property back through a deed in lieu, or let it run through the court. Each one lands differently on your credit, your taxes and what you might still owe when it’s over. Florida is a recourse state, so that last part is real here.

In other news, the Census Bureau released new home sales numbers Tuesday, and the inventory line in it is worth an agent’s attention.

What Did New Home Sales Actually Show in July?

New single family homes sold at a seasonally adjusted annual rate of 607,000 in July, 10.5 percent below June and 6.3 percent below last July. In the South, the rate was 383,000, down 13.0 percent for the month.

None of those changes clear Census’s own 90 percent confidence interval, which means the month to month swing could be noise. One number in the release does clear its own error bar: houses for sale at the end of July, up 1.9 percent from June to 488,000, which works out to 9.6 months of supply against 8.5 in June.

What Is a Short Sale Listing Competing Against Right Now?

Completed, unsold new houses stood at 117,000 at the end of July, and on the unadjusted count, a finished spec house is sitting a median of 3.2 months before it sells, against 2.6 months a year ago. The South is holding most of that inventory, 301,000 of the 495,000 new houses for sale nationally on the unadjusted count.

A finished house with nobody in it is a seller with a carrying cost and a deadline, and a short sale listing is competing against that seller for the same buyer. It needs lender approval on top of everything an ordinary closing needs, while the builder down the street can close in three weeks and move on price or terms an underwater seller can’t touch. Pricing and setting expectations on a distressed listing have to account for that competition, not just the resale comps.

Jacksonville, Florida is where I work, and distressed property is most of what crosses my desk. My license stops at the state line, so a question like this from anywhere else goes out through the SFR® referral network to somebody licensed where you live.

If any of this is close to your situation, I’m not hard to reach. JimArmstrong904@gmail.com, or (904) 671-4161 if talking’s easier.

Jim Armstrong, REALTOR® · Momentum Realty · SFR® (Short Sales and Foreclosure Resource) certified. This is general information, not legal, tax, or financial advice.

Momentum Realty is not associated with the government, and our service is not approved by the government or your lender.