It would appear that we may have a new word candidate for the mighty review board at Webster's. Rentership is a new phenomenon that is pervasive throughout our real estate economy. It is hidden below the radar and often not breached in conversation due to its unpopular appeal. Regardless, Rentership defines the thousands of homeowners that are stranded in properties where the mortgages owed, plus the costs to sell, exceed the value of the home. These owners are defined as renters with full ownership responsibilities. When the roof needs replacing, or the appliances breakdown, a call to the lender falls on deaf ears. This is the homeowner’s responsibility regardless of equity or no equity.
Rentership is prevalent because of the government sponsored and private loan modifications since 2008 in conjunction with the HARP refinance programs. These programs have promoted steps for underwater homeowners to obtain short term remedy with no longer term solutions. This is what a managed crisis looks like. The market never cleared and people are stuck with all the debt in Rentership.
How do you solve Rentership? This is very difficult to address and ultimately solve but here are a few examples:
- Hope: Hope that the real estate market rallies to your cause so you can sell at the top and break even.
- Bankruptcy: If you are eligible for the version that allows you to completely mitigate your personal liability, this could be an option. Although, I would first recommend trying to find a person that went through bankruptcy and says it was a great move. Bankruptcy is no fun and you may find that there are better decisions available.
- Short Sale: This is also not easy because a short sale without the mitigation of the debt leaves you exposed to future lender recovery. A short sale done properly with proper representation has the potential to mitigate all the debt, but this takes time and commitment to accomplish.
- Denial: Pretend that the problem is not really a burden. This is what most people subscribe to but it is not a great move when you are trying to get ahead financially and define the prospects for your future.
Whether we chose to solve the problem or ignore it we cannot underestimate its negative affect on neighborhoods and the economy as a whole. Rentership is going to be with us for an extended period of time. If you find yourself caught in this situation, save this for one of your New Year Resolutions.
George H. Omilan