Would you like a free, or nearly free house? Take over the payments, or buy it on Short-Sale, and it’s yours.
When we were transferred from Colorado to Oregon, we put our house up for sale. The housing Bubble was just bursting. In order to unload it quickly, we lowered the price $5000 a week until it sold. We were able to take a little cash out of it, but overall we lost about $40,ooo. If we hadn’t sold it right away, we would have lost another $20-30 and had no cash for a down payment on this house.
It is terrifying.
Unfortunately, the Bubble hadn’t started breaking here yet and we paid nearly full price for this beautiful home. We didn’t spend more than we should. We didn’t get a bad loan. We just bought the house we believed we were led to. Unfortunately, in the last four years, this house has lost a lot of market value – about $50-60k. Like many Westerners, we are now upside down on our loan.
So, we have some choices to make. Do we keep paying our mortgage? Do we sell the house? What should we do?
Though frozen in fear, we didn’t run.
Interestingly, we faced this charging bear a couple of years ago. (Notice I used the bear analogy, and not a bull? Pretty cleaver, huh?) After the loss of my job, nine months of unemployment, and a bank who wouldn’t talk with us, we started getting foreclosure threats in the mail. It was terrifying. Heartbreaking. Dis-couraging. Immobilizing. Depressing.
Though frozen in fear, we didn’t run. I regained employment, nine months later, a week before the Wells Fargo’s deadline. Without employment, they were threatening to foreclose. With employment, the offered to modify our loan. Did you know that a loan modification increases the principal, lengthens the term of the loan, and moderately lowers the interest? Sure, the payments became easier, but we are now paying several more thousand dollars for our home.
Good News and Bad News
The good news is, we didn’t lose our home.
The bad news is, we didn’t lose our house.
Now, a year and a half later, with no significant debt other than our mortgage, we need to move. My commute is too long, we are exploring other employment options, and the mortgage payments are preventing us from living a real life. We almost never eat out, we can’t afford a vacation, both of our cars need major work, our carpets need to be cleaned – and so on a so-forth. In other words, we aren’t really living – we are just surviving.
So, it appears that the best bet is to give our house away. Here are our reasons:
- It’s an Economic Black Hole.
Because of the Global Economic Financial Collapse (Which we didn’t cause!), our house, like many others, is worth no where near what we paid for it. According to some economists, it may take at least a decade to recover – and possibly longer. Why should we keep sending money to the bank?
If we rent a place equivalent to this, we’ll save about $500/month. In ten years, we will be able to save $50k – that’s what we’ve lost. But if we keep paying the bank, it will cost us over $200k just to break even. This is a no brainer.
- We Need to Move.
It is currently costing me $600/month to commute into Portland to work. This is not out of pocket costs, but total vehicle operating costs (eg; tires, insurance, maintenance, fuel, etc). In addition, the loss of sleep and time with my family is taking a serious toll on all of us.
We considered trying to rent this place, and then rent some place closer to work, the savings in commuting costs would make up for the deficit rental market value. But this is still only a break-even proposal, if we could rent this place. There are dozens of places for rent in our this small community. Basically, whether other employment opportunities come through, or I stay with my current employer, this location is no longer working for us.
- Cash Flow.
Over the past several months, we had to put new tires on both cars. Both kids needed some serious dental work. And there were some other major expenses that came up. For the first time in over a decade, we had to rely on credit cards just to get by. For the first time in a decade, we had debt (other than our mortgage).
In addition, I have some medical and dental issues I”ve put on hold, our house needs some serious routine maintenance, and both of our cars need a couple of thousand dollars of work. Indeed, both cars are rapidly approaching 200,000 miles and may need to be replaced anytime soon – and we have no savings. As long as we keep making house payments, we can’t afford to live.
Bottom line, this is a business decision.
So, the options are:
So, the options are to have someone assume this mortgage. Fat chance (or is that a slim chance?)! Do a short sale. I’m pretty sure the bank would never approve the amount for which we could sell this house. Foreclosure? Surrender the deed? Not sure. They say the bank won’t even talk until we’re at least two months in arrears. However, I’m three days late with the last payment, and someone from the Wells Fargo call center already called this morning.
It will be interesting to see how this plays out.
If you’re in a similar situation, you may want to join a discussion page I created on Facebook.