Am I better off just walking away?

[Debating]

I think my story is a little different than most from what I gather reading the threads here, but nonetheless I'm in a bad situation.

I bought my house in 2005 for 350K with 80K down. 270K @30year 5.6% fixed mortgage. Monthly payments are 1550+800 for tax/ins. Current balance owed 255K.

As far I can tell based on home sales in my area the house would probably get somewhere between 225K-275K "IF" it sold. So, I'm not really too far under water, if at all, right now.
Of course once you add realtor fees and so forth that would change.

The problem is I lost my 150K/yr job March 1st. My wife doesn't work and we have 2 kids ages 11 and 7. I have no reason at all to believe I can replace my income anytime soon.
So my thinking is we need to downsize and the quicker the better. The good news is we do have a decent amount of cash savings of about 350K which should help out longterm to get us back on our feet once we downsize. For example, my wife has signed up to start school to become a nurse. That will take 3 years though.

As soon as I got laid off I called Citi to see what they would be willing to do. What I was told is that since I'm not behind on my payments they wouldnt do anything and that since my mortgage is owned by Washington Mutual and Citi just services it I'm not entitled to some of Citi's programs. Further I was told my case would be forwarded to a counselor but because of backlog I probably wouldn't hear from anyone for 3-4 months. In the meantime they told me I should stop making payments so that when the counselor does call I will be 3-4 months behind.

None of this really makes any sense to me. I have to stop paying in order to get a modification??? Can I even get a modification if I'm unemployed???

At this point I'm thinking I'm better off just walking away from this house and buying something much less expensive for cash or maybe even just renting. At least walking away from the payment--maybe put the house up for sale and see what happens.

Btw, if I do stop making payments any idea how long before Citi kicks me out??? The women I spoke to was adamant that Citi didn't want my house and please don't leave(I never told her I was thinking of leaving). I'm in the Tampa Bay area.

Any thoughts??

Thanks.

[The Professor]

What state is your house located in?

[Debating]

I am in Florida.

[The Professor]

Your best bet, given the potential for a deficiency judgment is you lose control of over the disposition process, is to attempt to sell the property yourself.


Daniel

[ORNV3]

I would try to sell it because you're not very far underwater. Even if you have to bring money to the table it would be better than a deficiency judgment, especially since you have assets.

[Enough Already]

Debating,
I'm in the Tampa Bay area too. I'm no attorney, but based on all the research I've done, if you walked away you wouldn't face any deficiency judgment. In your case the only consequence would be completely ruined credit. Based on what you're saying if you sell the house for $250K you might only have to come out of pocket for about $20K. I think you have the right idea. If I were in your position I'd downsize too.

So, the question is:
Is keeping your good credit worth $20K in cash?

[Debating]

Thanks for the replies.

Yes, I agree selling would be the best option. The neighborhood I live in is easily one of the most desirable in Clearwater and there are very few homes for sale in the area. Thats the good news. The bad news is most of those that are for sale have been for a long time. Maybe those folks are just holding out?

The problem is I feel I need to get out of here fast. I hate going backwards financially. Thats why I have some money. In a normal market I wouldn't be too concerned, but I'm scared the selling process will take many months. Maybe I'm just over thinking and over stressed.

Perhaps I should just try and sell it myself and save the realtor commission. Someone could get a great house in a great area at a foreclosure price.

All I know is I feel like what money I do have is my families safety net/Ace-in-the-hole and I don't want to squander it trying to save this house. Especially since I believe the worst is yet to come economically speaking and this little mess were in will take years if not decades to resolve itself. Whatever I have to do I will do.

Thanks again for the advice

[Debating]

Well, I just got a call from Citi...that was fast!

Anyway, they say because I'm not working I can't do a loan mod but she asked me if I was interested in a short sale or DIL. I explained to her my house is likely worth what I owe on it or more and her response was "if thats so then this will be easy".

Waiting right now for a call back from someone at Citi to discuss this.

Just curious, if you do a DIL and the market value is at least equal to the mortgage balance and your not behind on payments, how bad is that on your credit??

[baileys dad]

My understanding is that in your case, stay away from a DIL ,as it is one short step above a foreclosure in terms of credit damage. Like Enough said, is your credit worth 20k cash? Seems like you should either sell it yourself or do a short sale..
good luck..

[Debating]

I'm trying to get used to all these new terms.

If I sell it thats pretty straight forward.

As for DIL vs Short sale, I'm not sure which hurts the credit score more.

I guess my thinking was if I did a DIL and was never late on a payment and didn't have any sort of deficentcy that might be quicker and easier than a sale of any kind. What is does to my credit I don't know. But if I could avoid the hassle of a possible DJ down the road that would be worth something I suppose.

Sort of thinking out loud I guess.

[Enough Already]

Hi Debating,
I don't think they'd come after you for the deficiency. The sale of the house, or foreclosure would most likely satisfy the loan. You own almost what it's worth, so you're in a great position there. As fas a I know a DIL is just about as bad on your credit as a short sale, or foreclosure.

Honestly, if I were in your position I would talk to a good realtor and list the house at a price where it will sell. If you price it right it won't take months to sell. I'd rather pay the $20K - $30 to make a clean break, and keep my good credit in tact.

If you don't want to pay the difference you could try for a short sale. The problem is you have to disclose your financial info to the lender before they will approve you for a short sale. They'll take one look at your savings account and say pay up!

As far as your savings, and the amount you own on your house go you're in a good position. You can get yourself out of it without a lot of damage to your savings account, and credit rating.

[Debating]

Thanks Enough.

I have a realtor coming Wenseday. Hopefully the house is worth what I think it is. If so, maybe I'll get lucky and be able to do a fire sale price that will move it quickly.

I have a job offer from my father-in-law if I want/need it but thats in Illinois where we're originally from. If I could keep my credit and my money we would have a solution to this mess perhaps.

[Enough Already]

Have you looked up you house on zillow.com? You can get a good idea of the current market value of your home on that site.

Great that you've got another job offer. IL sound cold though. If you price the house right it will sell. I think the fire sale idea will work out for you.

[Debating]

Zillow has my house at 310K.
A house close by sold last month for 300K. That house is a little nicer I think but 650 sqft smaller. Another a couple blocks away sold for 230K but it's 3brs not 4 and about 800 sqft smaller.
Yet another is for sale about 2 blocks away and similar to mine in size and condition with a bigger yard. It's listed for 327K

[Debating]

Talked to the realtor today. She has been very active in this neighborhood for years which is one reason I wanted to see what she has to say.

Told me she would list the house for 299K and would expect that to get attention as it would be cheaper than anything else around here. Said 270K should be very doable unless the market gets much worse.

Maybe this will turn out okay afterall.

[Enough Already]

Sounds like you're in good shape on the home value. Good luck!

[Debating]

Well, there goes the neighborhood.

I've got a feeling more than a few people in my area are going to freak out, but I'm putting the house up for sale at 279,900. Thats 90K less than a smaller home just listed a block away.

I'm hoping to dump quick enough to avoid the massive next leg down in prices coming this summer. I figure by August I'll be lucky to get 225K.

I need to find out how DJ's are calculated too. If it's on the appraised fair mkt value on the date of the forecluse sale I may be better off speeding that process up.

It sounds like the banks are moving foreclosure's through faster now. Anyone know how long it normally takes in Florida?

[Debating]

Thought I would drop in and give an update.

First off, the house is still for sale but I am stunned and amazed by all the showings we've had so far. Pretty much 1-2 a day everyday. It's becoming a fulltime job just showing the damn house!

The area I live in is quite nice. In fact, probably the single best neighborhood in Clearwater, Fl. As of right this moment my house is one of only two homes for sale in the immediate vacinity. Two other homes that were for sale have recently been taken off the market and two more have been sold, leaving just us for now and the other house. The other home is much larger and nicer with and asking price 200K above ours. Not sure it's that much better though.

I'm beggining to think the market may in fact be bottoming out at least in decent areas. Another thing I've noticed is many of the people looking at my house are from out of state or first time buyers. My realtor tells me she's having the best year she's ever had in her 20+ years in business. Given the traffic I'm getting I tend to believe her.

Since being laid off I've been able to basically replace my income through day trading stocks. I know that sounds risky and dangerous to most people, but I've traded for years and been very successful at it. I just never considered it a viable career option before. I may have to re-think that because making 8-10K a month sitting at home isn't giving me a lot of desire to go find a job. Thinking more about starting a business at this point than looking for work.

What a turn of events, huh? 2 1/2 months ago I scared silly and thought I was screwed beyond belief. I still may be before this is all over but for now I'm feeling a lot better and a lot more powerful about handling my situation. If I can keep trading well and keep the expenses under control long enough to get a business off the ground and see my wife through Nursing school we might just be okay. Thats a lot of if's though.

At this point I'm also seriously considering either taking the house off the market or raising the price. Haven't made a decision yet.

I guess my message to everyone who's hurting right now would be don't give up hope. Life has a funny way of working out just when you least expect it. And save your freakin money!!! Thank god I lived below my means for years and years and saved every dime I could. Many of the people who made fun of me for being cheap are screwed today and without the money I've saved over the years there's no doubt my family and I would be screwed right now ourselves.

So keep your rent/mortgage to no more than 15% of your gross income. NEVER use credit cards for anything. Never buy a new car and only pay cash for used ones. Never buy a more expensive item when a less expensive version will do the job. Learn the difference between needs and wants. A need, btw, means someone in your family will die if they don't get it. A want is everything else. And save every penny you can.

With a little luck I may pull myself out of this mess and hopefully a lot of others will too. Good luck everyone.

[snapple candy]

Debating,
I hear FLA starting to come back around (hit bottom). Based on what you are saying, it may be true. Good luck on your decisions.

[Enough Already]

Hi Debating,
Thanks for the update! I'm glad to hear things are going well. Please keep us posted on the sale of your house. I'll be interested in hearing what you decide to do and how much you sell if for if you decide to go ahead with selling.

EA

[Irish Gal]

Originally Posted by Debating

So keep your rent/mortgage to no more than 15% of your gross income. NEVER use credit cards for anything. Never buy a new car and only pay cash for used ones. Never buy a more expensive item when a less expensive version will do the job. Learn the difference between needs and wants. A need, btw, means someone in your family will die if they don't get it. A want is everything else. And save every penny you can.

You need to get your own t.v. show about finances! You're better than Suze Orman . Will you be my financial coach ???? I'm just curious, have you always been "thrifty" or were both your parents bankers ? ha ha ha (good ole day real bankers, not like today's screwballs ). I'm impressed with your disciplined lifestyle. Not sure I could do the 15% rent/mortgage thing. But, good idea. Glad to hear your wife will be a nurse. We need them ! Good luck to you and your family!

[azpoor]

Debating- Hope you get a quick and good sale. I don't think AZ is bottoming yet. I have heard of some bank owned going fast and others sitting at 50-60% off their 2004-2007 price still on the market after 6+ months. I think, unfortunately, that there will be more people who had ARMs, interest only, pick-a-payment plans, etc that will run into trouble soon as well as some modifications going back into trouble resulting in another wave of foreclosures over the next 1-2 years. Geesh....I may be one of them.

Any stock tips for the rest of us....

[Debating]

Enough, will do. The house is still on the market and when I did the deal with the realtor I had my lawyer amend their contract so that we can back out with owing anything even if they bring a genuine full price offer. So, Ill probably keep it listed because truth is I'd probably feel better being out of the expense.

Irish Gal....Haha...Maybe not t.v., I probably have more of a radio face..LOL! In all seriousness, no I didn't come from a well heeled family. Actually I was raised by a single mom and we were poor. Thats where my cheapness comes from. I never had anything so my tastes are pretty small, but it's the fear of being poor thats caused me to be this way. Kind of a curse in some ways, but right now Im thanking my lucky stars for the decisions I've made.

Azpoor...Stock tips? Not really a tip but my gut is screaming that if Friday wasn't the top to this rally then it's only a matter of days. If I had stocks that had run up a lot I would sell them. But thats just my opinion. Other than that I'm a trader not an investor so to speak. I buy 'em, I short 'em, it makes no difference to me as long as I make some money.

SInce we're on the subject, the funny thing is for years I've dreamed of trading full time. But how do you quit a 150-200K job with a wife and 2 kids? Now that I've been forced into trading I'm not so sure if it's for me. So far things have worked out okay. The truth is I should have made much, much more than I have. But the stress is unbelievable. It reminds me of the days when I was a full commission sales person. The difference is back then my wife worked, we didn't have kids and are monthly expenses were half what they are now. Just don't want to give anyone any ideas here. Trading is the last thing I would recommend to just about everyone.

[Debating]

I have an offer on the house for 250K. Backing out fees that would leave us 15-20K in the hole. They originally offered 220K and we didn't counter. I really didn't expect things to happen so fast. I figured it would take at least 6 months.

Inventory fell a lot in my area in Apr. According to stats provided by my realtor supply based on Apr sales went from 16 months to 6 months and the avg sq/ft price increased.

Decisions, decision...

[Debating]

As luck would have it we got another offer for 265K. That leaves us 10K in the hole. I can make that back in no time so we're taking it.

So it looks like this story is coming to an end. Closing is scheduled for July 30th and then we'll be moving to Illinois. I will work for my father-in-law and still be able to trade stocks. Between the two our income should be okay. We're just going to rent for now, but things are so much less expensive where we're moving that we'll be much better off I think. The kids are going to absolutely hate it with a passion, but we'll figure out something I'm sure.

Thanks to everyone for the kind words and good luck to all.