Keep my house or get out of it?

Mortimer Felsnick · #1 (**permalink**) 10-18-2009, 05:44 PM

Keep my house or get out of it?

I could really use some sound advice. I'm hoping someone here can help me make the right choice.

I own a house in SoCal with a loan amount of $300,000.00
I have two loans, a first and a second that's unsecured.
My payments were $1700.00 for the first and $600.00 for the second.

I hired a lawyer to renegotiate my loans and they've worked with the mortgage holder of the first loan to get me into a reduced payment loan of $1500.00 a month and have told me for now don't make any payments on the second.

The county re-assessed my house value for property taxes and the new value is $168,000.00

I've moved out of state and at this time the house sits empty. I have a potential renter for $1000.00 a month starting in February 2010

I can afford to make the $1500.00 a month payment which includes taxes and pay my home insurance policy and have enough left over to get by each month but there's nothing left over at the end of paying bills, paying for my cheapie apartment in the new state I live in, (job move), and the house payment.

I apologize that I'm not the "savvy financial guru" that so many other's seem to be but I'm not.

A relative has counseled me to keep the house as property values will someday recover.

My common sense tells me the house is already 11 years old and by the time property values recover to previous levels last year that no one would want to buy it for what I paid for it when for the same money they could buy a new house.

I'm scheduled to make the first "new" reduced payment on November 1st.

My other option is my lawyer, at my direction will get me out of the house.

Can someone make the case for keeping it?

Or can someone post somewhat detailed bulleted list as to why it's really stupid to keep the house.

Please go easy on me, I'm under a lot of pressure from all corners of life and am willing to keep the house if it makes good sense but if it doesn't, then I want to get out of it and not make any more payments, full payments or reduced.

Thanks...

disneysteve · #2 (**permalink**) 10-18-2009, 06:00 PM

It makes absolutely no sense at all to keep this house. Your relative who recommends keeping it because the value might possibly someday recover is insane. It will be a long, long time before a house appreciates from 168K to 300K. In the meantime, you'll be spending $1,500/month plus maintenance and repairs for a vacant house in another state that you have zero use for.

Get out as soon as you can, lick your wounds and move on.

LuxLiving · #3 (**permalink**) 10-18-2009, 06:20 PM

I'm curious - the lawyer will get you out of it HOW?

disneysteve · #4 (**permalink**) 10-18-2009, 06:39 PM

Quote:

Originally Posted by LuxLiving

I'm curious - the lawyer will get you out of it HOW?

I was wondering that, too. In fact, why is there even a lawyer involved? What legal issue existed that required getting a lawyer?

How much do you owe on this house? You gave the payments but not the balances.

maat55 · #5 (**permalink**) 10-18-2009, 06:56 PM

How is it that you cannot make your payments now? Are your loans fixed?

Do you still have the income that you had when you bought the house?

It is one thing to leave based on not having the income to pay the payments, it is another to leave due to lack of investment interest. Which of these do you fall under?

I would not rent it out in either case.

Mortimer Felsnick · #6 (**permalink**) 10-18-2009, 06:59 PM

Quote:

Originally Posted by LuxLiving

I'm curious - the lawyer will get you out of it HOW?

They said there were 3 different ways to get me out of the house,

Short sale
Deed in lieu of foreclosure
I forget the other option

I'll be talking with them this week to discuss which direction I want to move forward with.

Mortimer Felsnick · #7 (**permalink**) 10-18-2009, 07:02 PM

Quote:

Originally Posted by disneysteve

I was wondering that, too. In fact, why is there even a lawyer involved? What legal issue existed that required getting a lawyer?

How much do you owe on this house? You gave the payments but not the balances.

I've only been in the house for 2 years so most/all the payments are going to interest only.

Don't want to go into personal reasons for buying the house except to say that at the time it was the best option.

Mortimer Felsnick · #8 (**permalink**) 10-18-2009, 07:06 PM

Quote:

Originally Posted by maat55

How is it that you cannot make your payments now? Are your loans fixed?

Do you still have the income that you had when you bought the house?

No, have a new job that doesn't pay as much as the last job. Hit a ceiling in the last job, new job has more future potential so I made the jump. In hindsight it would have been safer to stay at the old job but like the challenge of the new job.

Quote:

Originally Posted by maat55

It is one thing to leave based on not having the income to pay the payments, it is another to leave due to lack of investment interest. Which of these do you fall under?

I would not rent it out in either case.

If I keep it, then my entire monthly income will go to mortgage, rent and bills until the new job takes me to a higher level which is my hope, but nothing is for certain except that I'm working very hard at it.

LuxLiving · #9 (**permalink**) 10-18-2009, 07:07 PM

Deed in lieu of foreclosure can come with strings attached - such as paying any remaining balance after the lender sells the house. Be careful. If you go that route, you'll want to be cleared of any further payments after signing off on it.

Ex: Say you owe 278,000.00, they sell for 160,000.00, they come after you to pay the remaining 118,000.00. UNLESS you and your lawyer make sure they have no further recourse against you.

Mortimer Felsnick · #10 (**permalink**) 10-18-2009, 07:10 PM

Quote:

Originally Posted by disneysteve

It makes absolutely no sense at all to keep this house. Your relative who recommends keeping it because the value might possibly someday recover is insane. It will be a long, long time before a house appreciates from 168K to 300K. In the meantime, you'll be spending $1,500/month plus maintenance and repairs for a vacant house in another state that you have zero use for.

Get out as soon as you can, lick your wounds and move on.

These have been my thoughts so far, I joined this forum hoping to find someone that could share a more detailed explanation of the pros, (if any), and cons for keeping the house.

maat55 · #11 (**permalink**) 10-18-2009, 07:16 PM

Quote:

Originally Posted by Mortimer Felsnick

No, have a new job that doesn't pay as much as the last job. Hit a ceiling in the last job, new job has more future potential so I made the jump. In hindsight it would have been safer to stay at the old job but like the challenge of the new job.

If I keep it, then my entire monthly income will go to mortgage, rent and bills until the new job takes me to a higher level which is my hope, but nothing is for certain except that I'm working very hard at it.

Your first step would be to try a short sale on the first mortgage. You may have to make some kind of arrangment with the second to get this done.

If neither will deal with you, you may have to walk away. Unless you file BK, you may have to settle with the mortgage companies later.

LuxLiving · #12 (**permalink**) 10-18-2009, 07:17 PM

Why doesn't the house bring a rental rate that would cover the mortgage?

Mortimer Felsnick · #13 (**permalink**) 10-18-2009, 07:24 PM

Quote:

Originally Posted by LuxLiving

Why doesn't the house bring a rental rate that would cover the mortgage?

There are so many rentals on the market where the house is under $1000.00 for a 3 bedroom with a garage.

Mortimer Felsnick · #14 (**permalink**) 10-18-2009, 07:30 PM

Quote:

Originally Posted by maat55

Your first step would be to try a short sale on the first mortgage. You may have to make some kind of arrangement with the second to get this done.

If neither will deal with you, you may have to walk away. Unless you file BK, you may have to settle with the mortgage companies later.

Seems like there's no good option. If I'm going to have to pay for the loans even after giving up the house I might as well try to keep the house and rent it out.

Would prefer not to have to file bankruptcy but I don't have any other great assets to lose, I drive an old car, no savings, washer and dryer are a few years old now... seriously, there's nothing of value to my life. Kind of sad to type that...

I don't know what to do...

I'll call my lawyer tomorrow and ask him to see what can be done to get me out of the house and loans. If bankruptcy is the only way to get out of the loans then I'll have to consider that option.

Ugh...

disneysteve · #15 (**permalink**) 10-19-2009, 09:27 AM

Renting out the house at a montly loss of $500 or more isn't an option. That just delays the inevitable and drags you deeper and deeper into trouble each month. The sooner you get out, the better.

When you switched to a lower paying job and moved out of state, what did you think was going to happen here?

LuxLiving · #16 (**permalink**) 10-19-2009, 10:04 AM

You may not be liable for any shortfall on the Deed in Lieu of Foreclosure - BUT - you have to make sure it's worded correctly.

I'm w/Disneysteve, it's not a good situation that you've gotten into, but I wouldn't keep putting money into a virtual money pit unless you see your fortunes picking up SOON.

Rental looks to be out - how are sales & short-sales going, in the area your house is located in?

Mortimer Felsnick · #17 (**permalink**) 10-19-2009, 08:55 PM

Quote:

Originally Posted by disneysteve

When you switched to a lower paying job and moved out of state, what did you think was going to happen here?

Well like I said in my first post,

Quote:

I apologize that I'm not the "savvy financial guru" that so many other's seem to be but I'm not.

I also had some other things in the works that didn't pan out but I don't need or want to bring them up. Suffice to say I've been trying to help others out by keeping the house, again, I'd rather not bring up some of the other factors involved except to say I'm a sap. How's that?

Quote:

Originally Posted by LuxLiving

You may not be liable for any shortfall on the Deed in Lieu of Foreclosure - BUT - you have to make sure it's worded correctly.

I talked to my lawyer today and he said he would see if he could do a Deed in Lieu of Foreclosure and get me out unscathed.

I'll post what he gets back to me with.

Seeker · #18 (**permalink**) 10-20-2009, 01:11 AM

"unscathed"?

Deeds in lieu of forclosure usually do not happen with two mortgages on the property (two liens). If your property taxes were reassessed to $168k that is a major loss from your purchase price... and most lenders will seek the fair market value of the property. So, how will you come out unscathed?

No matter what you do, your credit score and future ability to get credit will be impacted by these decisions.

Please make sure you have a good lawyer familiar with these types of issues. Please also understand 100% what they are telling you before you sign anything. Please read everything... please ask questions on anything you do not understand.

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