short sell and rent to get out of other debt or hold on and wait it out? - Page 2

[swissgirl]

i notice you are living in the SF Bay Area (I used to). If you bought at the top or close to the top of the market, I doubt home prices will once again rise to the high levels of just a couple of years ago. So waiting it out may not see a high enough recovery to get close to what you paid. I was trying to guess the 1.5 hour away cheaper city you refer to. Is the cost of living there really cheaper?

Since you can presently afford the house you are in, perhaps it would be best to stay as trying to sell for less than you owe can wreak havoc with your credit and financial situation.

[abomgardner417]

Speaking from experience, I would not do it unless you are in a position where you are behind on the mtg and the cc bills and you have no income coming in. And like pps have said, you won't be approved unless you're behind and maybe not even then. Even though that was our situation, we didn't just jump into a short sale, we did everything we possibly could first. We cut things out of the budget to the extreme, we got pt jobs, we went through CCCS, we sold things, etc. When all that still didn't work we put our house on the market. We were finally looking at a short sale 10 mo in, but my dh had no choice but to file bankruptcy so we lost the house anyway.

Trust me, to have a short sale on your credit for 7 years will not be a picnic. Not as bad as bankruptcy of course, but you will have a hard time renting. The only reason we were able to rent was because we moved just before the bankruptcy, so it wasn't on my dh's credit for the landlords to see until well after we moved in. You will get crummy rates on car loans, even with large downpayments (we just bought a car last week - very depressing rate considering I have a credit score of well over 800, but dh's is abyssmal). And I don't see home ownership in our future at all because of his credit.

So, just my opinion, but don't do it unless you're in a very desperate situation.

[choli]

Originally Posted by nicolelynn

It is true, the bank shouldn't have given us a loan. All the mortgage calculators I found online said you needed at least like $85,000/yr to afford a $200,000 home. We got a $230,000 home on $68,000/yr...and our mortgage is half of our income, not 30% like the old standards dictated.

I don't want to sound harsh, but while you say that the bank should not have given you a loan, why did you take the loan knowing that you couldn't afford it?

[ilovebabies]

I've been doing just a little bit of research on short sales because of the financial position we're now in. Hopefully we won't have to "go there" but I've been doing research just incase.

From what I've read, it's not easy to be approved for a short sale and you have go through TONS of paperwork and it sounds quite complicated and time consuming. Doesn't mean it won't be worth it, but I'm just saying that's what I read. I also read that it's really not a huge deal to have on your credit report. Not near as bad as a foreclosure. I read that it's just a little "ding" on your credit report. Now, I don't now how true this is. It's just what I came across as I've googled and read different sites on short sales.

However, I've also read about renting a property and wow, that's not something I'm sure I'd want to get into either!

And as I've been doing research on foreclosures (at least in my state), what happens is that the when house goes up for auction, if t's not purchased for what you owe to the bank, you are still responsible for the difference. It's considered debt you owe, just like on a cc and they can come after you for the amount you owe. So, if you foreclose, be praying that it sells for what you owe or you will still have the difference to be responsible for! Yikes! Unless you file for bankrupty of course.

Seems there just aren't any "good" options out there. Y'know?

[Zach'smom]

Op- Has your financial situation changed since you bought the condo? Have either you or dh lost your jobs? You say you have 2 car payments and student loans to pay off. I am guessing you had them when you bought the home since it was only 2 years ago.

Now you want to sell the condo dirt cheap and make the bank eat the rest of the mortgage because you want to move now.

I really don't want to sound harsh. It is just that buying a home is a major investment that really needs to be thought through. You knew what your finances were. You knew what your savings was. You knew how much the mortgage was. You chose not to put any money down. You knew how much you felt comfortable paying a month. What the bank is willing to give you and what you are comfortable with are two completely different numbers. You need to take reponsibility here. You made all the decisions that got you here. I am really sorry this sounds so harsh. But sometimes there is no easy way out.

[Belleweather]

Originally Posted by 1growingsprout

Just a PSA.... Please remember when you short sale or let your property foreclose the bank is loosing money. That all starts to trickle down to the employees at the bank, there is less $$ to pay the employees and people like my DH are faced with the real possibility of loosing yet another job because of a direct relation to the mortgage/credit industry.

So while something may benefit 'you', it may be harmful to many many other families.

The losses the bank faces from the credit crisis affects the amount they can pay for deposits, (savings accounts, CD's fixed investments etc) the amount they have to charge on credit cards etc...

No one forced you to buy the property, no one forced you to sign the mortgage papers and put nothing down for the contract. That was a conscious choice you as an adult made. Ignorance is not an excuse.

3 yrs to debt free is not that long. Adulthood is 'stressful' and not fun at times.

Sorry but it just really bites when people think they can just 'walk away' because it will be better for them with out seeing the full picture.

Ok Im going to stop now before i get banned.

Actually, this is mostly not true anymore. In the past, banks would make mortgages and hold on to them until they were paid off. This gave them an incentive to only loan to people who could pay back their mortgage because if they made bad loans they lost money.

However, in the late 1990's banks started securitizing their loans -- that means they sold them off as investments and didn't keep them on their books. The loans were divided up into risk 'tranches' and sold like any other security on the market -- these are the CDOs that you hear about on the news, and are a big part of why we had loans for 100% of the purchase price without income or asset controls.

So, no. When people default on their mortgages your husband's bank doesn't lose money. Some large collection of investors -- likely pension funds, cities and counties, hedge funds and foreign investors -- lose money.

Originally Posted by nicolelynn

It is true, the bank shouldn't have given us a loan. All the mortgage calculators I found online said you needed at least like $85,000/yr to afford a $200,000 home. We got a $230,000 home on $68,000/yr...and our mortgage is half of our income, not 30% like the old standards dictated.

What do you think it worse, foreclosure if we can't get a short sale, or whatever chapter bankruptcy that will allow us to keep our home but will relieve our credit card debt? We are going to pray DC gets this promotion with a $10,000/yr raise first and foremost, and then try to short sale and get debt reduction for our credit cards if he dosn't. But if no one will work with us..is there a second best option?

Since you have time, I'd wait before you worry about foreclosure or short sales or bankruptcy. It's likely that as a part of either the Stimulus package or the TARP Program reauthorization there is going to be an amendment to the bankruptcy act to allow something called "Mortgage Cram-Downs". What that means, basically, is that if you go into bankruptcy the judge can force the holder of your mortgage to renegotiate the loan so that you no longer owe more on your house than it is worth. It would be something worth investigating, if you're in a situation where you would otherwise be filing for bankruptcy.

Originally Posted by greenegirl

My friend had her CPA check into how this works for a short sell and part of the consumer debt relief package did change this rule so the write-off amount would not be taxable income. However, I believe she was told that this had only been changed for a limited amount of time, unless Congress votes to extend it. I don't know when it is supposed to end. You might be able to find out on the IRS's website.

Obviously, if you were going to have $150,000 forgiven, and that counted as taxable income, you are talking about a hell of a lot of income tax -- and not just on the $150,000 write off but also on the income you and your husband earned from your jobs since your tax rate would be bumped up all the way around. I'm not sure how the short sell compares to a foreclosure in this regard.

I believe that forgiven mortgage debt is going to be tax free for 3 years from the passage of the bill, so about 2.5 years from now. But they may end up reupping that if we're still in the midst of a crisis... which we likely will be, with all the Option ARMs that are resetting into 2010 and 2011.

[belchers1]

Originally Posted by freespirited

I see your POV, but sometimes circumstances change, people want to move, etc. I don't think she wants to get out of her obligations so much as she just wants to relocate, which is where I am at. We didn't intend to sell our house 3 years later but we now want to, and we can't sell it without getting totally hosed. In my case, we have a lot of money in the house so it hurts, but the OP doesn't have any money in the home, just her credit score to worry about. However, she isn't happy where she's at which happens, and I think it's harsh to say she should stay there just because she now owes more than the house is worth. I'd hate to want to move and not be able to for that reason. It sounds to me like they should not have been given the loan in the first place. People living paycheck to paycheck should need a good 20% down payment. That is what we did. The banks are to blame bigtime. The buyers are as well, but this could have been prevented by the banks. Now I cannot even get a 10k heloc on my house that I have 30% equity in because of the credit crisis. I don't blame people who bought with no money down as much as I blame the banks who happily and blindly wrote the loans. Yes there were people who just thought values would keep going up and wanted in only out of greed, but some of us actually bought homes to live in and decided we wanted to or needed to move somewhere else. I guess I just don't equate that with wanting to walk away "just because".

Couldn't agree anymore!

To add to that... When we bought our home in 2006, our plan was to only live here for 3-5 years, then "upgrade". Now, nearly three years later, we cannot make the decision to just sell (and at least just break even) even though this was our original plan. This isn't fair to us. Yeah, it's not fair to the bank either, but I feel as though (actually, I know!) we got screwed when we bought this house. Looking back, we were so naive! Most banks and bankers are simply just downright greedy. Think about it. Why should everyone else do "what's right" for the bank, but not for themselves and their families??? The poster that said your happiness is more important than your FICO score was right!! We came up with a plan to get out of the house we're in and into another one, but I'd rather not discuss it via public forum.

I guess the varied opinions on the topic of deciding to "let a house go" are a result of different beliefs about this place we live in called the world. I am NOT a slave to my society.

[Crazybean]

Another similar situation here.. I am working to pay my bills and each penny of my paycheck is going to some bill (living paycheck to paycheck). I don't have a penny to myself but it's the path I chose and now I'm literally paying for it. I have no emergency fund, my family has no health ins (I make too much to qualify for state), no savings and really nothing in my checking. I know it's temporary and I'm fighting to keep everything. ONE day this will be reversed and I can stop working as much but that day isn't today. Plus, it can take years for a foreclosure or short sale to happen. By the time you are late on payments, the bank deals with the countless other number of cases, court dates ect.. that can be years down the road and your credit will be affected for 7 years from then too.. I'm not willing to accept that. Now, if something happens where I can't physically work, or we get a crazy bill, we will be in deep crap.

I think you should stay put OR rent it out for as much as possible and find a really cheap place to live until the economy turns up.

[choli]

You know how we try to teach our children natural consequences?

A child who continually blames others and thinks the rules do not apply to him will often find that other children do not want to play with him. That is a natural consequence

The natural consequence of a short sale or foreclosure is that financial institutions will not want to play with you for the next 7 years, because your credit report will show that you did not keep the terms of your mortgage. Landlords will be very wary of renting to you - if you had no qualms about not paying a mortgage, why would they trust you to pay rent?

There will be serious, long term natural consequences to this, just as you are suffering the natural consequences of taking on a loan you could not afford without considering how you would have to sacrifice to pay it. Think long and hard this time before you make a decision that will affect your family for years to come.

[Selesai]

I agree with the "harsh" posters.

Originally Posted by belchers1

Now, nearly three years later, we cannot make the decision to just sell (and at least just break even) even though this was our original plan. This isn't fair to us.

Yes, it is. It's what happens when you buy a house. You "put down roots." It's not like renting. You don't get to just leave whenever you want. But hey, you get to paint your walls whatever color you desire!

Originally Posted by belchers1

I am NOT a slave to my society.

I think this is silly and besides the point. You chose to take the loan, you have to deal with what that means. You put yourself in this position.

[belchers1]

Originally Posted by Selesai

I agree with the "harsh" posters.



Yes, it is. It's what happens when you buy a house. You "put down roots." It's not like renting. You don't get to just leave whenever you want. But hey, you get to paint your walls whatever color you desire!




I think this is silly and besides the point. You chose to take the loan, you have to deal with what that means. You put yourself in this position.

Technically, I CAN just leave whenever I want. I live in the United States.

My comment on not being a slave to society is certainly not silly.

I am dealing with my situation perfectly fine. I'll actually be better off than ever before in just a few weeks. We're moving into a nicer home for a cheaper price! Now, I'll be able to stay with my children more often to give them the attention they need and deserve and I'll be able to eventually return to finish my degree. Who wouldn't want that? I must look out for myself and my family before anyone else. This is the mentality most people have afterall! My selflessness has always been a flaw of mine. I've learned to look out for our best interests as opposed to others. This is what's right. No one will look out for us if I do not! God has really blessed us in making this fresh start in life available to us.

My question would be this...

What caused the economy to go so far downhill? What started it all? Greed! It's not simply a matter of things "costing" too much. It's that nearly everything we as people "need" in life (homes, vehicles, etc.) has some sort of tie to someone else, a middle man, making a profit off of it. Corporations have their "bottom line" and I think that we as everyday people should as well. I guess that's the bigger picture though.

When I gave a vague summary of my own personal situation, I was not asking for pity. My DH and I know we made a mistake in purchasing this home. I suppose I could go further into detail as of why I *know* we got screwed, but this only makes me appear as blaming someone else for OUR mistake. Just as we made the mistake to purchase this home, the bank made the mistake in giving us the darn loan! With our income we certainly should not have received a loan for the amount we did! But someone convinced us to do that and that they could make it work. Why? BECAUSE THEY WERE MAKING A PROFIT OFF OF THE DEAL! GREED!!!

Life is all about learning and we certainly have learned a lot of lessons over the past few years, not just with finances, but also as far as parenting. I used to be the type of person who always did what I was told and what others told me was "right" in this world (very mainstream) because I wanted to avoid a lifestyle similar to that of what my mother raised me in (dysfuncional upbringing). I have learned that this has gotten me nowhere, but unhappy. I now go by what I feel is right in my heart and what I feel God would want. I found my middle place. My life has transformed for the better!

I apologize for carrying on for so long (if it seems I did). It may just be my 41 pregnancy hormones getting the best of me. Oh wait, I better not say that, as it may appear as though I'm using my pregnancy as an "excuse"

[acegmom]

Originally Posted by belchers1

What caused the economy to go so far downhill? What started it all? Greed!


With our income we certainly should not have received a loan for the amount we did! But someone convinced us to do that

And you are claiming that you weren't greedy?

These are YOUR words. You are in this situation because you were as greedy as the banking system you are blaming.

You made a choice to buy this house. That choice defined the choices you are free to make in the future. You may not want to admit it to yourself and would rather blame "the greedy bankers," but the fact is -- you accepted the debt. You should pay the debt.

I'm sorry you now are not able to have everything you want. However, responbility, especially for our mistakes, is a hallmark of adulthood.

Jill H.

(lucky mom to Amelia 18, Camille 16, Evan 13, and Gracie 11)

[belchers1]

Originally Posted by acegmom

And you are claiming that you weren't greedy?

These are YOUR words. You are in this situation because you were as greedy as the banking system you are blaming.

You made a choice to buy this house. That choice defined the choices you are free to make in the future. You may not want to admit it to yourself and would rather blame "the greedy bankers," but the fact is -- you accepted the debt. You should pay the debt.

I'm sorry you now are not able to have everything you want. However, responbility, especially for our mistakes, is a hallmark of adulthood.

Jill H.

(lucky mom to Amelia 18, Camille 16, Evan 13, and Gracie 11)

No, we weren't greedy actually. We wanted a decent home that we could afford and could not even get that AT THAT TIME. I had people down my back about how my children (still very young) should not be sharing a bedroom because they were of a different gender (our own pediatrician at the time!) That's the kind of crap I fell for. My mistake, yes ma'am!

I have everything I want. Happiness is all I want. I have that. I have my family. I have what makes me happy. Thanks for caring though!

It's pretty obvious who is getting offended by my beliefs.

[choli]

Originally Posted by belchers1

No, we weren't greedy actually. We wanted a decent home that we could afford and could not even get that AT THAT TIME. I had people down my back about how my children (still very young) should not be sharing a bedroom because they were of a different gender (our own pediatrician at the time!) That's the kind of crap I fell for. My mistake, yes ma'am!

I have everything I want. Happiness is all I want. I have that. I have my family. I have what makes me happy. Thanks for caring though!

It's pretty obvious who is getting offended by my beliefs.

Well, yes, I must agree that I find the belief that your wants are more important than your responsibilites a bit offensive.

[Dar]

Just a reminder of the UA:

Do not post in a disrespectful, defamatory, adversarial, baiting, harassing, offensive, insultingly sarcastic or otherwise improper manner, toward a member or other individual, including casting of suspicion upon a person, invasion of privacy, humiliation, demeaning criticism, name-calling, personal attack, or in any way which violates the law.

It's clear that people have differing ideas here about what is right in this situation, and that's fine... but remember that there's a real live human being typing on the other keyboard, and we'll all trying to do the best we can...

Thanks,

Dar

[yukookoo]

well after discussing and thinking for a few days, or actually just sleeping on it overnight and coming off the original OMG we've lost how much? shock...

THe place we wanted to move isn't that much cheaper at the moment, a little cheaper but not that much (Sonoma co) We decided that moving is a want, we are ok where we are we love our home, we like the community, and i can start working a little here, get my feet wet.

This is all good as long as dh has work and we can manage our bills.

In a few years, we may see an increase in homes here, we may not, at that point we can decide if to sell, take a loss and pay it off ourselves, or rent or whatever. Our loan is not horrible and we are trying to work on renegotiating, its not an arm but it is an interest only, with a good rate even in todays market, but if we can lower our rate and start paying down the principle that would be better.

Anyway i guess we decided we will probably keep our home, pay it off, rent it, keep it for our kids, retire in it, whatever. We are pretty young, I am hoping to live at least another 50 years Im 30. and my daughter I assume will outlive me by many years and sometime in the next 50 years or more I am hoping we can break even if not than we will have a home we have paid off and own and that's good too. We did not buy at the top peak, i dont think, we bought on the way down. We thought it was the bottom when we bought.

[KateKat]

Originally Posted by belchers1

No, we weren't greedy actually. We wanted a decent home that we could afford and could not even get that AT THAT TIME. I had people down my back about how my children (still very young) should not be sharing a bedroom because they were of a different gender (our own pediatrician at the time!) That's the kind of crap I fell for. My mistake, yes ma'am!

Each of us is responsible for our own actions (and in some cases, inactions). You choose to buy the house that you bought, nobody forced you to. In my opinion, you are ethically obligated to pay for your present house, especially since you say you can.

The bank doesn't have anything to do with this. Everybody knows that banks are in business to make money, I wouldn't expect them to do anything else but try to make money.

[dsaucone]

yukookoo - It sounds like you're doing the right thing by taking responsibility for your actions and making the best of it by finding good things around you.

[Usually Curious]

Originally Posted by 1growingsprout

Just a PSA.... Please remember when you short sale or let your property foreclose the bank is loosing money. That all starts to trickle down to the employees at the bank, there is less $$ to pay the employees and people like my DH are faced with the real possibility of loosing yet another job because of a direct relation to the mortgage/credit industry.

So while something may benefit 'you', it may be harmful to many many other families.

The losses the bank faces from the credit crisis affects the amount they can pay for deposits, (savings accounts, CD's fixed investments etc) the amount they have to charge on credit cards etc...

No one forced you to buy the property, no one forced you to sign the mortgage papers and put nothing down for the contract. That was a conscious choice you as an adult made. Ignorance is not an excuse.

3 yrs to debt free is not that long. Adulthood is 'stressful' and not fun at times.

Sorry but it just really bites when people think they can just 'walk away' because it will be better for them with out seeing the full picture.

Ok Im going to stop now before i get banned.

Yeah that ...

[Crazybean]

I'm concerned about the people who think it's as easy as leaving the keys and walking out the front door. There will be courts, lawsuits, judgments, horrible credit, attorney fees ect added on to a certain dollar amount but to each his own.