I am a victim of the housing crisis

[jgold47]

Before I really get into it, here are some facts

I am in my late 20's and not married

in september of 07 I moved to Pittsburgh and bought a house that had been listed at 149,999 for 127,000. I paid little down (was cash strapped), and I paid for that on my interest rate which is around 7.25%. I did a good old fashioned 30 year mortgage, nothing voodoo.

in july of 08, a combination of factors led me to move back to michigan. I currently rent an apt and continue to make payments on my house.

I make about 2.5x my age, and while I dont have a lot of debt, in order to make mortgage and rent payments, bills, WOL, I have started offloading some debt to credit cards.

I have a credit score in the upper 700's and have about 1,000X my age in the bank in 'cash'.


Here is my problem - my house still hasnt sold after 6 months. I am getting freaked out because I cant keep making these payments. I am pretty sure that part of the problem is the realtor I had been using, but I would also say that with the markets being what they are, and with the type of house (a good 'starter' house), its probably not been the easiest sale.

I have the house listed currently at a price that should allow me to break even (which is 100% ok with me). My realtor claims that this is a good price, and that its not the issue (she blames the market). a new realtor i am interviewing thinks that its a little high.

I had an opportunity to rent the house out for about 900/m. my mortgage payment is 1175/m, so I would be subsidising the house. I have never been a landlord, and I am having some serious reservations about it.

I have had this discussion with 100's of people in the last couple of days and I am still unsure what to do.

Should I rent the house, subsidze the rent, and try again in a year or

should I keep the house on the market, with a new realtor, a sell it ASAP, even if its at a financial loss ( I am willing to go into my savings to be done with it). I have a feeling that it wont appraise/sell for what I need,

I also think its bullshit that I did everything right - I bought a reasonably priced house, took a normal loan (my only sin was not putting much down, but thats irrelevant here). Bought within my means, and now I am forced to suffer for the sins of everyone else. I cant sell my house because 1) no one is buying and 2) I am going to get dinged no matter what because my house has given back almost 20K in value that I know of.

If I try for a short sale, the bank will likely tell me to get fucked as I have too much credit, income and assets. If I let the house get foreclosed I lose my excellent credit score. If I pay from my own pocket to cover the loss, then all the cushion I have worked so hard to build up goes away. Where is the protection for people like me? Baring a miracle, I will not be able to walk away from this unscathed. its not my fault the banks made ****** loans to ****** people. Its the people like me who would most certainly buy another house, go on a vacation, buy good and services, invest in property and other vehicles. But we get screwed.


There..... discuss.....

 

[feynmix]

rent the house. Take in whatever you can for rent, eat the remaining losses until the time to sell gets better.

Did you really think that once you moved back to MI, you would have been able to pay off 2 rents? It seems like you should have started renting off the house as soon as you moved back.

 

[Ambulance Chaser]

Rent if you can find a good management company. You're obviously not going to be able to be a landlord if you live in Michigan and the property is in Pittsburgh. Sell at a loss otherwise.

 

[jgold47]

Originally Posted by feynmix

rent the house. Take in whatever you can for rent, eat the remaining losses until the time to sell gets better.

Did you really think that once you moved back to MI, you would have been able to pay off 2 rents? It seems like you should have started renting off the house as soon as you moved back.


Back in the summer it was a little easier to comtemplate selling. This was before the major melt downs. I tried renting it before I left, but I would rather be done with it. This was only supposed to be a couple of months of waiting, not 6+. I moved back in with my parents initially, so I had a couple of months head start. I do place some of the blame on my realtor who has needed herd run on her, which is why I am replacing her.

 

[Piobaire]

Originally Posted by jgold47

in september of 07 I moved to Pittsburgh and bought a house that had been listed at 149,999 for 127,000. I paid little down (was cash strapped), and I paid for that on my interest rate which is around 7.25%. I did a good old fashioned 30 year mortgage, nothing voodoo.

...

I had an opportunity to rent the house out for about 900/m. my mortgage payment is 1175/m, so I would be subsidising the house.

Something is not adding up. If you got a 30 year fixed, "nothing vodoo," you put down 20%. So that's carrying 101k approx. To carry that at 7.25% gives you a payment of 689/month + property taxes. Even if you did the whole 127k, at 7.25%, I get a number of $866. That leaves 4k per year on property taxes and that's assuming you amortize them vs. just paying them. At 4k, that means you are paying 3.1% of value in property taxes.

Using your numbers, a yearly negative cash flow of $3300, remember you can do that for 6 years, before you are break even. I would assume property values go up in six years.

 

[lee_44106]

Your predictament sucks. The housing market sucks, the economy sucks.

Unless you have a good friend/family member in Pittsburgh who can keep a close eye on the house for you, I would not try to be a landlord and rent the house. It's fraught with problems even if you have good tenants. You could potentially have lots of problems with the house that you cannot immediately address because you are in Detroit.

I know most people hate seeing their house/investment lose value, but in this ****** environment you have to be realistic. I say suck it up, sell the house at a loss, lower your asking price some more to attract more traffic/potential buyers. Check out Zillow.com for comparable housing prices in the neighborhood.


Don't let your credit score suffer. People with poor credit score are doubly f*cked.

 

[EL72]

Originally Posted by jgold47

should I keep the house on the market, with a new realtor, a sell it ASAP, even if its at a financial loss ( I am willing to go into my savings to be done with it). I have a feeling that it wont appraise/sell for what I need,

Yes!! Cut your losses now and be done with it. The sooner the better.

Subsidizing the rent is not a good idea and you will have paid more over 1-2yrs in expenses than the capital loss. More importantly, you don't want to be a landlord and this will result in lots of stress and headaches for you in the coming months. Avoiding that is worth a lot. (I own several rentals so I think it's great but it's not for everyone, especially if you're in another state).

 

[jgold47]

Originally Posted by Piobaire

Something is not adding up. If you got a 30 year fixed, "nothing vodoo," you put down 20%. So that's carrying 101k approx. To carry that at 7.25% gives you a payment of 689/month + property taxes. Even if you did the whole 127k, at 7.25%, I get a number of $866. That leaves 4k per year on property taxes and that's assuming you amortize them vs. just paying them. At 4k, that means you are paying 3.1% of value in property taxes.

Using your numbers, a yearly negative cash flow of $3300, remember you can do that for 6 years, before you are break even. I would assume property values go up in six years.

Keep going, I am not following you?

and yes my taxes and insurance are about 4000/year

 

[EL72]

Originally Posted by jgold47

Keep going, I am not following you?

and yes my taxes and insurance are about 4000/year

He's wondering why your mortgage payments ($1,175) are so high, and so am I. $1,175/month should pay for twice the house you bought.

 

[jgold47]

Originally Posted by EL72

He's wondering why your mortgage payments ($1,175) are so high, and so am I. $1,175/month should pay for twice the house you bought.

hmm

02/01/2009 $1,165.81 Sign Me Up

Payment Breakdown as of 01/2009
Principal and Interest $877.16 Transaction History
Escrow Payment $288.65 Escrow Analysis
Homeowners Insurance
Tax Information

--------------------------------------------------------------------------------

Total Monthly Payment $1,165.81

Account Overview as of 01/23/2009
Loan Type and Term 30 Years Conv w/PMI Monthly Statement
Original Principal Balance $127,000.00 Payoff Information
Contractual Remaining Term 28 years, 10 months
Interest Rate 7.375%
Current Principal Balance $124,947.05
Escrow Balance $1,701.22
Late Charge Date 02/17/2009

Year-to-Date Summary
Interest Paid $0.00 Year End Statement
Real Estate Taxes Paid $3,146.78 Tax Information

 

[EL72]

Originally Posted by jgold47

I also think its bullshit that I did everything right - I bought a reasonably priced house, took a normal loan (my only sin was not putting much down, but thats irrelevant here). Bought within my means, and now I am forced to suffer for the sins of everyone else. I cant sell my house because 1) no one is buying and 2) I am going to get dinged no matter what because my house has given back almost 20K in value that I know of.

If I try for a short sale, the bank will likely tell me to get fucked as I have too much credit, income and assets. If I let the house get foreclosed I lose my excellent credit score. If I pay from my own pocket to cover the loss, then all the cushion I have worked so hard to build up goes away. Where is the protection for people like me? Baring a miracle, I will not be able to walk away from this unscathed. its not my fault the banks made ****** loans to ****** people. Its the people like me who would most certainly buy another house, go on a vacation, buy good and services, invest in property and other vehicles. But we get screwed.


There..... discuss.....

Also, while I understand your frustration, I think your anger is somewhat misplaced. Real estate investments are not short term liquid assets and no one should buy a property expecting they can sell a year later at no loss. The fact that people were flipping homes for a profit in the last five years is an anomaly. I would never buy a property without intending to hold it for at least 10 years if I expect to make a profit on it. So your problem is not really the housing crisis but that you are trying to sell a house a year after buying it.

 

[gdl203]

How did you make your decision to move back to MI? Wasn't this critical RE issue part of your decision making process?

 

[Ambulance Chaser]

Originally Posted by EL72

Also, while I understand your frustration, I think your anger is somewhat misplaced. Real estate investments are not short term liquid assets and no one should buy a property expecting they can sell a year later at no loss. The fact that people were flipping homes for a profit in the last five years is an anomaly. I would never buy a property without intending to hold it for at least 10 years if I expect to make a profit on it. So your problem is not really the housing crisis but that you are trying to sell a house a year after buying it.
+1. Even in a good market, there is no guarantee that your house will sell within a set period of time. And even if it does sell, it is likely you will take a loss after factoring in realtor commissions.

 

[SkinnyGoomba]

J,

You might consider speaking to a lawyer or independent company about an existing mortgage mitigation if you can prove that you can no longer pay for it.

In many situations it brings up tax consequences, so take the possible consequences into consideration if you end up doing that.

After that i would get a renter in the house, and wait until the market comes back alive, which certainly may take a few years at least.

 

[jgold47]

Originally Posted by gdl203

How did you make your decision to move back to MI? Wasn't this critical RE issue part of your decision making process?


Absolutely, but it came down to - About to get fired in PGH, a city I moved to soley for the job, where I had no friends, and was pretty miserable, or go back to Michigan where I am from, with family and friends and other opportunities (I am in commercial real estate, which believe it or not is better here than in PGH). No one forsaw it taking 6+ months to sell this house. Without getting into it, there are some unique aspects of this house that should have made it very attractive. However, I am not even getting people to come look at it.

Originally Posted by Ambulance Chaser

+1. Even in a good market, there is no guarantee that your house will sell within a set period of time. And even if it does sell, it is likely you will take a loss after factoring in realtor commissions.

I completely understand - but - at the rate that I am going, with my mortagage set up to amortize the way that it is, I would have needed to own that house, all things being equal for about 10 years to sell it straight up and not take a loss assuming I sold it for the same price I bought it for. I think you have to assume some level of appreciation, which in this case is workign backwards. Plus, I got a good deal on the house from someone who was desparate to sell it after a family member died, and by all accounts, I got it for below market value which was one of the things that attracted me to it, so you would think, that if I was willing to sell it at a break even, or slight loss, I would be able to do.