Walk away or stay - housing

[ClakarEQ]

http://www.msnbc.msn.com/id/38158763/ns ... al_estate/

WTF the rich folks don't do what they probably could do and will end up screwing us all.

/tangent

This post is a bit chaotic, so try to follow :p

I don't know how many here are home owners but I got it about as bad as you can when it comes to this. I bought our house about 18-24 months before the market tanked and only just now would I be able to sell my house for "even" (not lose money but not make any). The deal is I put nearly 60k down on the home and would essentially flush that down the toilet, I suppose that money is gone and nothing can be done about it regardless unless I stay here for 15 years in hopes to make it up (but I hate the hood I live in, 20/20 hindsight type thing).

My beef is though, if I fuck over the bank, walk away, get sued or what the fuck ever, would it be worth it?

My credit is near perfect and I'm a little shy of 800. I hold little to no debt to anyone other than my bank for the mortgage and my credit union for a car loan.

If I walk away, I would hope to get a better home for cheaper, but would not have the 60k cash to put down on it and frankly don't know what walking away from my mortgage would do in regards to even attempting to getting a new home.

I'm just sick of paying a large amount of money, every month, for my home, that probably won't sell for what I owe anyway. I would have to do some major upgrades IMO to make it sellable (like the kitchen and that is a CHUNK of cash).

I'm not expecting to get some worldly advice from folks here but I'm no finance major and was just curious of folks opinions.

[Reynaldo]

If you walk away you're going to demolish your credit and really be forced to rent for several years to build it back up.

If you're in good shape financially (it sounds like you are), you could consider renting it out and moving to a different location instead of selling/walking, even at less than your monthly payment if you want to try to recoup the money once the market rebounds.

Where's the bailout for people like you and me that do things right, pay our bills on time and struggle for it? Why don't you get to refinance and be able to use that 60k down as an ADDITIONAL 60k off the current appraised value of the house to refinance into a much lower payment? People who live by the book end up getting the high hard one =(.

[KaiineTN]

My opinion is that you should never treat a home as an asset with the expectation of appreciation as the only means by which you'll see any gain. Owning an occupied rental property is an asset, though not one that I'd want to manage. Too much risk. Frankly, housing in most places of the country is still very overpriced, and I think we'll see another crash. I think commercial real estate will be first, though.

Prices have clinged partially because of government incentives like the tax credit for first time homebuyers and what not, but I think those have expired or are expiring soon, so demand will drop further. The country also has a huge excess of homes, and many remain unoccupied with owners/banks just holding onto them with the expectation the market will get back to where it was. Demand dropping + huge supply = prices will fall considerably, and that's a good thing for the country even if it is a bad thing for you.

If there is no advantage to walking away now rather than later when shit hits the fan and everyone else is doing the same, you might as well stay. If you're staying only because you think the value might increase, get out.

Also, a note on your article. $1-3 million dollar homes probably aren't usually owned by "rich" people. I'd bet that they're usually owned by people stretching themselves way too thin with way too much debt in order to appear wealthier than they are.

[ClakarEQ]

My opinion is that you should never treat a home as an asset with the expectation of appreciation as the only means by which you'll see any gain.

Um I would say that is the only reason to own a home, why else would someone invest in such a thing without an expectation of greater return? As for the only asset or to put all your eggs in one basket, if that is what you meant, then I could see what you mean to a point.

Regardless, if housing drops significantly lower than where we're at now, I would be a fool to stay. I would also assume many other home owners would feel the same. I would straight up stop paying, wait the 6-12 months for the bank to do anything about it, take that saved up money and use it to buy a new home. I know one of my wife's friend did that very thing. Then lost her second home, filed for bankruptcy, and WAS STILL able to get a third mortgage for her now third home. Like I said, I'm not all knowing when it comes to the housing and finance stuff but when I see folks like my wife's friend or friend of mine that did something similar, I really have a hard time thinking I would get so totally screwed so bad that I couldn't get a reasonable loan.

I did call my bank regarding the refinance option several months back, they said straight up, that we won't even talk to you until you're 3 months delinquent and even then won't have resources to work with you for several weeks after that. I've read stories here locally in my area where folks didn't get evictions from banks for nearly 18 months after not paying the mortgage.

I'm more venting than making sense I suppose though

[KaiineTN]

A home is not an investment if you're living in it. It is, at best, a gamble, a speculation. It is a liability, and should be treated as such.

It is precisely the mentality of home ownership as an investment with return via appreciation that fueled the fire that got the market all out of whack. Everyone wanted in on it and prices got inflated to unrealistic levels, yet there was always a buyer because, hey, houses appreciate! It's what they do!

Watch some of this video, which lays out the crash in detail, before it happened. This guy has been spot on with his predictions. It will give you some insight as to what you can expect to happen going forward, too.

[ClakarEQ]

Kaiine, you're not making sense here and I'm not wasting 70min on a utube flic.
I think you should understand the definition of investment, because everything you buy could be called an investment, even a can of pepsi.

If you or this crazy guy here thinks a home is not an investment, let me ask, what is an investment then, stocks, gold, diamonds, water? There is zero promise that anything you buy will have a greater value tomorrow, not one thing, not gold, not stocks, etc. etc. The very definition implies risk, hope, etc, no promise, no guarantee.

You're talking all crazy crazy shit and frankly I don't think you're in a position to speak on those points. There is a difference between reading it, watching it, and living it. 2 of the 3 won't do and it appears you're only going on 2 of 3 here. This is akin to book smarts and street smarts, I would never want one or the other as it makes you stupid, but having a balance of the 2 is where the real "smart" is at.

Not flaming you or not trying to but seriously, your spin on things is so far out of the box that it can't be called "normal" and for me, gets put into the fiction bucket.

[KaiineTN]

There are basically two kinds of investments, those that generate income, and those your purchase with hopes of appreciation in order to sell at a higher price. Many are a combination of the two. My argument is that the home you live in is not an investment, it is a liability because of the costs associated with living at/maintaining the property, as well as the opportunity cost of the income stream it could produce for you.

I want to clearly differentiate speculation from investment. Real estate prices are not on a sound foundation, they are driven by speculation. Speculators hope to take advantage of market fluctuations, whereas investors provide capital for things of real or increasing value. The structure of a home itself does not increase in value with time, it decreases. What it comes down to, then, is whether you think the property your house rests on is of increasing value, and if that perception of increasing value is enough to justify the liabilities incurred while residing at said property (imo in the vast majority of cases it is not, especially now and in the foreseeable future). If you truly think they are, then I will reluctantly accept you calling your home an investment, though I believe most to be purely speculations.

There is nothing wrong with speculating, it's just not investing. Maybe it's just all semantics though.

And that video is well worth watching, if you ever find the time.

[Drem]

holy shit..... hey Flink, here's how normal people that aren't in la la money land use the word 'investment':

in·vest·ment   [in-vest-muhnt]
–noun

a devoting, using, or giving of time, talent, emotional energy, etc., as for a purpose or to achieve something

also, touching on your theory that homes will never gain value, only the land they're sitting on.... if you build a patio, you just upped your resale value. if you put in a swimming pool, you just upped your resale value. if you knock down a tree, you just lost resale value. etc etc etc etc....

you are arguing semantics. do you rent or own a home? you still haven't even told us where you work, so why do you ever think anyone's going to listen to all the dumb regurgitated shit that you saw on a youtube video when as far as we're concerned, you don't even exist?

[Tossica]

I walked away from my fully upside down, underwater, suburban prison and I haven't regretted it. I'm renting a much more affordable house and will continue to do so until my credit is repaired and I am able to make a more wise purchase in the future.

[Kaemon]

If you walk away you're going to demolish your credit and really be forced to rent for several years to build it back up.

If you're in good shape financially (it sounds like you are), you could consider renting it out and moving to a different location instead of selling/walking, even at less than your monthly payment if you want to try to recoup the money once the market rebounds.

Where's the bailout for people like you and me that do things right, pay our bills on time and struggle for it? Why don't you get to refinance and be able to use that 60k down as an ADDITIONAL 60k off the current appraised value of the house to refinance into a much lower payment? People who live by the book end up getting the high hard one =(.

Right now the rate dropped to 4.57 % that's without points. I agree with Rey, why cant we use that 60k down as an additional 60k off the current appraised value of the house to refinance into a much lower payment..I mean wtf. That money is already into the home. I have no problem breaking even when I sell, I just want the money I put down and what I've invested into it and I'm gone.

[Savanna]

We had a guy in our neighborhood buy one of the largest models, had a vette sitting in his garage and toys galore. He bought another home in another state and let this one foreclose. Pissed off the neighbors of course who have to see this house sit there and look like crap. I've heard of a few stories like this and it seems like a trend of sorts. Personally, we got out of our house in NV just in time for the crash to happen, made a good amount of equity. We bought our house up here but for more than we originally would have because of a few months waiting for our 1st house to sell. Now you can walk into my neighborhood buy 1000sf more, brand new home for almost 60k less than we bought ours, because of foreclosures. It makes me sick to my stomach when I think about it.

Vene's boss wants us to move to Texas but because of the current state they can't really offer us the relocation package we would need. (buy our house if it doesn't sell type of deal that they sometimes offer) We are holding tight until I finish nursing school and then we'll decide whether we just walk away from this mess. We put enough down on the house that we should at least come out even but it would be nice to carry some equity over for a down out there. I think we got spoiled by having our 1st house make a chunk of equity so we, like some, thought of our house as a bit of an investment. (yes, naive thought!)

What frustrated me the most is watching the amount of foreclosures in our neighborhood and within the 1st year they lived in them. It just tanked our house values.

[Reynaldo]

That's the biggest pisser of the whole thing. Because joe_schmoe walks away and his 200k home short sales for 130, all the people who are playing by the rules suffer the property value dip.

We did pretty much the same thing. Got out of our house in Texas last summer (values weren't as bad in Texas as they were everywhere else), turned 45k profit on the deal and have been renting ever since.

I ALMOST pulled the trigger on a home here in Orlando, but it just doesn't make sense - was one of those new Beazer built energy efficient deals, but was a new home / new development. Can't justify spending 30-40k more on a new home when some ridiculous percentage of homes here are vacant. Wife loves new shineys though and on a home these days it's really a give and take with buying an older house that's less energy efficient and having to fix it up, vs a newer home that saves you money on bills but costs more now.

Either way, I'm very content to rent an apartment for the next couple years then re-evaluate. It's nice not having to mow the lawn / clean the pool =P.

<--- fat lazy American!

[Nusk]

my situation is different than most. my houses mortgage is paid off been that way since 03
since 2006 my house has lost 35% of it's assessed value and yet i still pay property tax on the full value.
cant walk away and no one will buy a half million dollar property when they can get a foreclosed house for 250k.
it bothers me that banks were given money to loan to people but that didnt happen. i wonder how much it would of cost to just used that money to pay off all those underwater mortgage

[Reynaldo]

Yeah, doesn't make a whole lot of sense.

And in the meantime, people that rent and don't pay property taxes (renters insurance whoop de doo) can sit there and vote to keep raising your property tax rate!

[10sun]

my situation is different than most. my houses mortgage is paid off been that way since 03
since 2006 my house has lost 35% of it's assessed value and yet i still pay property tax on the full value.
cant walk away and no one will buy a half million dollar property when they can get a foreclosed house for 250k.
it bothers me that banks were given money to loan to people but that didnt happen. i wonder how much it would of cost to just used that money to pay off all those underwater mortgage

Submit a revaluation request with your county auditor.

[Kramer]

yeah, it may even be worth it find a group that will protest for you, i know my godo friend runs one and they don't charge unless the tax rate is lowered.... we bought our house luckily in the bottom of the market and got it about 20K cheaper than a regular time (142K - probably sell 165 ish within next 18-24 months) and they attempted to raise our tax rate from 142k - 170K withig 18 months after moving in.. ridiculous.

[10sun]

The forms for revaluation in Ohio are pretty easy (I've done it for 5 different counties pretty much boilerplate the entire time).

I'd suggest getting them yourself and going after it.