Housing Woes

[Speed]

So, some of you may know I bought a condo back in 2005, paid $146k for it. I've since moved out of state. I need to sell it asap. My brother was staying there but wants out, and I do not want to try and manage a rental from 1300 miles away.

Current units in the complex are listed for $82,500. I'm assuming most times you won't get listed price, so say $80k. I owe $105,600. Closing costs at 6% would be $5100. I'm looking at owing approx $30k at closing.

I just looked at my bank - personal loans are allowed up to 60 month terms, at 11.25% interest. This would be a $656 payment per month! More than my current mortgage payment!

I looked at the hardship assistance from the mortgage company, and they want you to cash out everything you have before getting assistance, including your 401K. I really don't want to do that.

Any other ideas on how to get out of this, other than stopping my payments and ruining my credit and letting the bank foreclose on it?

 

[Dave Siciliano]

I'm really sorry to hear this is happening to you. There seem to be a lot of folks with the same problem.

In some states, you aren't personally liable for a loan on your homestead. That being said, you will still ruin your credit if you walk away. It seems the mortgage company would be better off working with you than having you abandon the unit, have possible damage done and then try to reposition it. You probably need to be negotiating with someone with the ability to work things out. If you can't get to that person, I would probably start with a good local real estate attorney to see what he or she thinks they can do. A credit counseling agency could be another option. In Ohio, there is a lot of work being done to help people that my lose a home like this. Have you checked to see if any programs are available to assist you?

The bank clearly needs to understand the home isn't worth the loan amount and if you walk, they will have a very substantial problem. See if a short sale is a possible option. I was in your circumstance once, and I couldn't even get the lender's attention until I was delinquent. As long as you make payments on time, they may not focus on the problem. Until you quit making payments, it's really not their problem and you're off the radar screen.

Best,

Dave

 

[gkainz]

I had a house in SoCal in the early 90s with the same situation. I couldn't afford to bring $50k cash to closing just to sell the house, but I could afford the couple of hundred negative every month to rent it out. In time, the market came back up and I was able to sell for a break even position (well, probably didn't recover all of the monthly loss). If I would have held on to it a few more years than I did, it would have been a different story. That $180k house sold again 2 years ago for $750k ...

 

[Greebo]

So, some of you may know I bought a condo back in 2005, paid $146k for it. I've since moved out of state. I need to sell it asap. My brother was staying there but wants out, and I do not want to try and manage a rental from 1300 miles away.

I know you don't want to, but you may have to consider hiring a property manager. The question is, can you get rental income in the condo's area of at least $1,460/mo. Any less and you'll risk having an alligator on your hands - albeit not as much of an alligator as it is now empty. Check http://www.rentometer.com

Current units in the complex are listed for $82,500. I'm assuming most times you won't get listed price, so say $80k. I owe $105,600. Closing costs at 6% would be $5100. I'm looking at owing approx $30k at closing.

Don't forget taxes on the sale. Dunno your area, in MD they work out to 2%, split between buyer and seller or sometimes, fully paid by seller (depending on the contract).

I just looked at my bank - personal loans are allowed up to 60 month terms, at 11.25% interest. This would be a $656 payment per month! More than my current mortgage payment!

Thats a great mortgage payment on 105k. You might be able to come out well ahead or lower the rental rate. (Of course, condos often have restrictions on renting, too.)

I looked at the hardship assistance from the mortgage company, and they want you to cash out everything you have before getting assistance, including your 401K. I really don't want to do that.

Any other ideas on how to get out of this, other than stopping my payments and ruining my credit and letting the bank foreclose on it?

Rent it if you can, wait it out if you can't, or ruin your credit for 10 years. When you are under water like this, there isn't much else you can do unless you get creative and are willing to pay for that creativity up front.

You might seek the advice of a real estate/foreclosure attorney who might be able to negotiate with the bank to take the deed in lieu of foreclosure, or to take less at sale in exchange for not having a total loss. In this stalled market, the bank is looking at a loss in any situation except that which you continue to pay the mortgage. A lawyer may be able to explain to the bank that your situation is one where you would rather take the credit hit than the 30k loss, which would leave the bank to take the 30k loss anyway.

What area (zip code) is this condo in, anyway? And how many br's?

 

[121Dispatch]

I'm with ya! We've had our house on the market in Atlanta for just over a year now, and been paying equally for a second place across the country for several months. I really think foreclosure is the absolute last option. It's very tempting now, but I can only imagine how I would feel in 3-7 years when I still have no credit for a new house, or whatever I may need/want.

My backup at this point is to try to rent it out once our current real estate contract expires - although, it's almost as hard finding someone that wants to rent for a price that won't sink you either...at least you can stop the hemorrhaging, and perhaps live with the bleeding. Of course, then you have to consider any repairs/replacements that will have to be done once you kick the tenants out and try to sell again.

As others said, you MIGHT be able to get the bank to work with you, but my guess is renting it out is probably the more likely option. It's a tough market now, and all the foreclosures really doesn't help those of us that are responsible enough to not let our homes go into foreclosure.

Good luck, and let us know if you find a good option that works for you!

 

[Anthony]

I know you don't want to, but you may have to consider hiring a property manager.

I would look into this but typically residential property managers want enough in fees that it may not cover the mortgage or even get close. This is totally dependent on the rental market though. Find out what these units can rent for then you will be armed with enough info to talk to a few property management firms who may want a percentage of the rent as their fee.

I still own a single family home in suburban Philly and rent it out, but manage it myself. However, I've been in commercial real estate for over 20 years and yes it can be challenging depending on your tenants. Screen your tenants! Credit check, references, etc.

Another strategy is to get your lender to extend the loan and lower the payments where the rent then may cover the loan. I would not want to come out of pocket $30K just to get out of the house if I could rent it and keep it until the market comes back. And it will come back.

 

[Greebo]

I agree with Anthony, but as a long distance landlord (as he would be), a PM (a GOOD one) is the only way to do all the things that a diligent landlord needs to do.

If its at a loss, at least it will stem the bleeding.

 

[woodstock]

If you are currently paying under/around 656 a month on your mortgage... it's going to take 45 months of just paying a mortgage on an empty unit before you will lose 30K by just leaving it empty. That doesn't even factor in the tax benefits from having the mortgage. (also doesn't factor in the utils you will be paying, which would cancel the tax bennies most likely)

Why does your brother want to leave? Could you lower the rent enough to talk him into staying and thereby save some money on the payment and have him pay utils?

 

[Speed]

I know you don't want to, but you may have to consider hiring a property manager. The question is, can you get rental income in the condo's area of at least $1,460/mo. Any less and you'll risk having an alligator on your hands - albeit not as much of an alligator as it is now empty. Check http://www.rentometer.com

Rentometer says area rent is $895! I find it hard to believe I could get that much, but it would be nice!

Don't forget taxes on the sale. Dunno your area, in MD they work out to 2%, split between buyer and seller or sometimes, fully paid by seller (depending on the contract).

Taxes... Forgot about that.

Thats a great mortgage payment on 105k. You might be able to come out well ahead or lower the rental rate. (Of course, condos often have restrictions on renting, too.)

I really can't complain about the mortgage payment. It's 623/month. I originally had a 80/20 loan, and have paid off the 20. Thus far the condo association hasn't limited rentals, though they are trying to. HOA fees are $125/month, and are supposed to go up in May.

What area (zip code) is this condo in, anyway? And how many br's?

80019, 2 bed 2 bath, 1088 sq ft. I sent emails to two PM's in that area this morning and haven't heard anything back yet. I'm thinking that may be the best option from what you and others have told me.

 

[Greebo]

If you can break even or at least stem the losses somewhat while you hold the property until market value rises again, it'll be to your advantage.

And if you rent it, you can take depreciation.

 

[Speed]

If you are currently paying under/around 656 a month on your mortgage... it's going to take 45 months of just paying a mortgage on an empty unit before you will lose 30K by just leaving it empty. That doesn't even factor in the tax benefits from having the mortgage. (also doesn't factor in the utils you will be paying, which would cancel the tax bennies most likely)

Why does your brother want to leave? Could you lower the rent enough to talk him into staying and thereby save some money on the payment and have him pay utils?

That's a good way to look at it. I hadn't thought about that (which is why I asked for ideas!)

My brother wants to go home to Texas... Though I was just talking to my mom and she says she'd rather not have him back in her house! Right now he has roommates in there to the point that he is only paying me $150 out of pocket, and he's still complaining about the price. I think he wants it for free.

 

[Everskyward]

Since I know your condo is close to DIA, I'm wondering if there is any way you could market it as a rental to airline employees who are moving into this area. Seems like there would be a demand for that since Denver is a base for Frontier, United, Skywest and others.

 

[woodstock]

That's a good way to look at it. I hadn't thought about that (which is why I asked for ideas!)

My brother wants to go home to Texas... Though I was just talking to my mom and she says she'd rather not have him back in her house! Right now he has roommates in there to the point that he is only paying me $150 out of pocket, and he's still complaining about the price. I think he wants it for free.

well, don't let him take advantage of you. also make sure his buddies aren't trashing the place. "roommates" sounds like more than one to a room. ouch.

 

[woodstock]

Since I know your condo is close to DIA, I'm wondering if there is any way you could market it as a rental to airline employees who are moving into this area. Seems like there would be a demand for that since Denver is a base for Frontier, United, Skywest and others.

that is a great idea!

 

[gkainz]

Since I know your condo is close to DIA, I'm wondering if there is any way you could market it as a rental to airline employees who are moving into this area. Seems like there would be a demand for that since Denver is a base for Frontier, United, Skywest and others.

I was JUST thinking the SAME THING!

 

[Speed]

I was JUST thinking the SAME THING!

That's actually what I have been doing, prior to my brother getting in there. There's a problem though. The HOA has decided they don't like crashpads. They have been doing anything they can over the past few years to put a stop to it. First they started by limiting parking - only two vehicles per unit allowed. Some of the crashpads would have up to 10 people in them!

Next, was stopping the free shuttle service provided by the extended airport parking next door. Now it's a min $30/month charge payable to the HOA who then issues a pass which you take to the parking company. The HOA worked an agreement with them so that they will not allow someone without a pass on the shuttle. In addition to the $30, you have to pay $5 per trip.

The latest - which came out this month - is every crashpad occupant has to have a six month lease approved by the HOA and pay $50 to the HOA. And a maximum of four people per unit.

This has pretty much killed the crashpads, which was the intention. Most airline people only use a crashpad for a month or two at the most, while they are on reserve. As soon as they get a line they start commuting. When you start adding up all the charges and hassles from the HOA, it's cheaper to stay at the Red Roof Inn.

 

[Everskyward]

I wasn't really thinking of a crashpad situation. I was thinking of people who are intending to permanently relocate to Denver but don't want to buy a house right now. Maybe they have a similar situation to yours somewhere else.