By Annie Goeller, Daily Journal of Johnson County staff writer
Six years ago, the Greenwood home was an investment and a place to live for years to come.
But now, Shea Davis is just looking to avoid foreclosure and sell the house she no longer can afford.
After a divorce and losing her job, Davis can't keep up the monthly payments on her three-bedroom Villages of Grassy Creek home.
To avoid foreclosure, she worked with her bank to sell the home for less than she owed.
The home is currently priced at $95,000, nearly $10,000 less than she owes.
Davis won't make money off the deal, and the sale will damage her credit, but at least the impact won't be as bad as foreclosure.
She will be happy just to break even, she said.
"I really thought I'd be able to stay in this house for a long time, but with my divorce and losing my job, I can't," Davis said.
As many as one in five home sellers local real estate agents meet owe more on their mortgage than their home is worth.
And that can affect nearly every homeowner, from people who are selling, to those facing foreclosure, to people who just worry about the value of their home, local bankers and real estate agents said.
Exactly how many local families are upside down with their mortgage - the term for owing more than the home would earn in a sale - isn't known.
But some real estate agents estimate that the percentage ranges from 15 percent to 20 percent of local homes, which would be in line with national estimates that put the rate at 20 percent.
The issue stems from multiple reasons, but the main factors are the drop in home values locally and across the nation due to a sluggish housing market and the impact foreclosure sales have had on neighboring homes, experts said.
In some cases, appraisers are struggling to get a good estimate on homes because the sales of foreclosures in the area are higher than seller-occupied homes, which also drives down the values, said Doug Davis, an associate broker with RE/MAX Select Realty.
And if people have a second mortgage they took out when home values were high, the impact can be even worse.
Davis' Greenwood home hasn't changed much since she bought it in 2003, except for needing new carpet.
She had hoped to sell it for a little more than she owed, starting the price at $110,000.
But two homes for sale across the street sat idle for a year, and at least seven homes are currently for sale in her neighborhood. And she knew she was competing with foreclosed homes, which are seeing prices drop significantly.
So, when her home didn't sell for six months, she worked with the bank again to drop the price.
"If I could have stayed here longer, I probably could have made money," she said.
The problem is far-reaching.
Take the family that wants to sell their home, either because they are moving, have found another home or just can't afford their mortgage anymore.
If they bought their home in the past two or three years, it's unlikely they will get as much as they paid for it, Jarvis Realty Group agent Tony Nally said.
That means the family would need to come up with hundreds or thousands of dollars to pay off the remainder of the mortgage when they close on the sale.
Nally has seen some people pay as much as $15,000 at closing.
"This is a situation we've never seen in our lifetime; at least in mine. I've never seen home values depreciate," he said.
For years, people have considered the equity in their home as a safeguard, Heartland Bank President Steve Bechman said.
If they were struggling financially, that money could be a last resort to help catch up on bills or pay off debt, he said.
Now, many people no longer have that option, which is cause for concern, he said.
But the real impact isn't truly known until people sell, he said.
"You don't have a loss until you sell it. It's all on paper," Bechman said.
And that's why some experts are recommending that if you don't need to sell your home, keep it.
If you can afford your mortgage and aren't moving, then you should hang onto your home until the values return to more favorable levels, Carpenter Realtors agent Dave Cook said.
"If you don't need to sell and can continue to make your payments, obviously we tell them to hang in there," he said.