walking away from home?

[80sjunkie]

I live in a recourse state and would financially be ok if our home lost all it's value, so I can't see there being a point in which we'd consider walking away.

[Velvetshady]

I'd have to be at the point that staying would affect my credit rating more long term than walking away would.

[ijack]

Do you want out because it's worth less than you owe or is there another reason?

[Velvetshady]

What would be your short and long term plans for housing if you walked?

[LoveTrains]

I have considered walking away from my condo. Its a 1 br/1 ba and we moved out of state 2.5 years ago for a job opportunity for me. We now live about 90-120 minutes away, so too far for me to commute, and my H is able to commute to his old job from our new location.

The only reason that we have not walked away is because the condo is in a recourse state. Since we are both employed and have assets, I have every reason to suspect that the bank would sue us for the deficiency. I would rather at least still own the asset, which I now rent out, then have nothing and still owe a huge chunk of change to the bank.

We have been aggressively paying down the second mortgage on the property (bought with an 80/15 (put 5% down) back in 2005 and I think that in about another year we might no longer be underwater on it. But we still won't really have any equity so I don't think we will sell it.

[liveintheville]

I know that here many landlords run a credit check on prospective renters.

[barney96]

did you try to short sale the place? A short sale is better on your credit than a foreclosure. I'd talk to an attorney and a realtor who specializes in short sales. Even in recourse states, they dont necessarily come after you for the full amount. They will probably make you sign a promisary note if they think you are walking away though you can afford it. You dont necessarily need the banks approval before listing, though getting their approval in the beginning helps your buyer close sooner.

[nestbrenda]

If it makes more sense to walk away, I'd walk away. No question about it.
I wholeheartedly disagree with all these people who feel these deep moral obligations to the bank.

[Velvetshady]

I would just advise you research and know all the factors before making a decision. I know my BIL was just barely able to avoid foreclosure and bankruptcy with a short sale, but he has not been able to get approved to rent through any rental companies, he has had to rent directly from individual owners (and give very large deposits even though he can prove guaranteed income through through Navy retirement and disability).

Personally, I have issues with people that walk away just because others are and not due to hardships. You signed a contract and took a risk, and by walking away you are making your neighbors and the bank pay for your risk. We've been wanting to move for ~3 years now because of changed career plans and DH's 5 hour min per day commute, but since several of our neighbors foreclosed a few years ago, we haven't been able to afford to sell. Prices are starting to recover though, so we should be able to sell for what we owe next year.

But, I can step away from the personal feelings and it truly *is* a business decision. Just like every business decision you need to factor in all the pluses and minuses and make as informed a decision as you can. I would definitely do some research on how it would affect your ability to rent in the places you'd like to rent before making a final decision.

[LoveTrains]

May 15, 2012 19:38:17 GMT -5 pennypenny said:

If you don't mind answering, are you renting at a loss? I know that we would have to especially when you factor in the condo fees. And I just don't know what the benefit would be to pay down the mortgage any quicker. I really think the value is probably half of what we paid, so that would be a lot of money to no longer be underwater.

Yes, we are renting at a loss. Right now we collect $1100/month in rent on the property. we pay $1530 to the main mortgage, condo fee of $200, and then $1100 on the second mortgage. So its a BIG fucking loss each month.

But we will be done paying the second mortgage in about 14 months and the minimum payment on it is only $200, so I could be paying a lot less if I wanted.

At this point I just consider that extra money as retirement savings. Andplusalso, we rent where we live now and that rent is only $1550. So in my mind I figure the loss is only $450/month (rent we pay out - rent we collect) because we still need a place to live and if we lived at the condo we would still be paying mortgage & condo fees.

[LoveTrains]

May 15, 2012 19:49:18 GMT -5 pennypenny said:

May 15, 2012 19:44:10 GMT -5 @nestbrenda said:

If it makes more sense to walk away, I'd walk away. No question about it.
I wholeheartedly disagree with all these people who feel these deep moral obligations to the bank.

But that is my question. When does it make more sense to walk away? If you can afford it, but are seriously underwater, should you stick it out?

Only you can make that decision. Does the house still work for you and your family? Do you enjoy living there?

What are the implications of walking away in your state? Is it a recourse state? Can you be sued for the deficiency? How will it affect your credit, etc.

I weighed all those options and decided it did not make financial sense to walk away. You might come to a different conclusion based upon the laws in your state.

[Deleted]

My story is similar to LoveTrains and we have been renting at a loss of $1K/mo for the last three years. It absolutely sucks and we are tired of being out of state landlords. We listed our co-op for sale a week ago and expect to pay ~$90K out of pocket just to get rid of it. That is a lot of money lost. But, DH needs a spotless credit history to be able to work in his industry so this is what we have to do. I would love more than anything to walk away. Let's face it, shelling out $126K in three years with nothing to show for it would make any reasonable person want to puke.

In the end, you have to figure out what you can live with and go from there. Is the foreclosure or short sale worth a hit to your credit? Do you care about breaking a contract or not? What are some not so obvious consequences to walking away? You should ask a ton of questions, then ask some more.

GL, you are not alone in this crappy real estate world.

[imojoebunny]

May 15, 2012 23:02:27 GMT -5 pennypenny said:

Yeah. I its not worth the risk. I need good credit for my clearance. I guess I am just frustrated. And seeing what some people are trying to sell their condos for right now makes me wanna puke.

Sounds like you have your answer. I feel for you. My BFF is in this boat. They need to move, the schools are not good, and they have a school age child, but they will have to walk to do so, in a recourse state. She went to talk to a bankruptcy attorney who told her what to do. They are going to walk and the attorney does not think the bank will come after them. A short sale is not an option. They are 66% under their mortgage. They will never get out close to even, in their lifetime. They plan to rent and have MIL co-sign (she will).

It sucks.

[chia]

May 15, 2012 23:02:27 GMT -5 pennypenny said:

Yeah. I its not worth the risk. I need good credit for my clearance. I guess I am just frustrated. And seeing what some people are trying to sell their condos for right now makes me wanna puke.

Not only do you have your clearance to worry about - you also live in a recourse state (I think)...

The clearance itself is worth A LOT around here - and, if for no other reason than that, I'd stick it out.

We're underwater by $100K+... so, I feel your pain.

[ECB]

May 15, 2012 20:01:56 GMT -5 Velvetshady said:

Personally, I have issues with people that walk away just because others are and not due to hardships. You signed a contract and took a risk, and by walking away you are making your neighbors and the bank pay for your risk. We've been wanting to move for ~3 years now because of changed career plans and DH's 5 hour min per day commute, but since several of our neighbors foreclosed a few years ago, we haven't been able to afford to sell. Prices are starting to recover though, so we should be able to sell for what we owe next year.

I largely agree with this. I don't understand the "I'm underwater - I need to walk away!". Um.... why? If you don't NEED to move and your home otherwise still works for you - why walk JUST because you're underwater?

We just moved a year ago and I wouldn't be surprised if we're underwater, but we plan on being here for at least 15 more years. I would hope by that time that we're not and that even if we sell for less than we want, we'll still make $$.

That being said - I'd say that a 5 hour commute is a "hardship" in my book!

[chessie]

I would consider it if I had to get out of the state asap. I live in a recourse state, both of us work- so they would go after DH and myself at some point. Knowing my house is worth 100k less then what I have paid for it and dumping 1000's a year into it..makes me pretty sick. Both of us want to leave the state, since there is NO jobs here.