Let's get right to it:


  • My wife and I bought a condo in St. Louis in 2006 for $265K as my primary residence [5% down, 95% with Regions Mortgage (no 2nd mortgage, "lender paid" PMI at higher interest rate)]
  • Changed jobs and moved out of state in 2007 (I was 23) and listed it for sale. We got a total of 0 offers and began renting it out to "ride out the soft market". We took ~$1000 hit EVERY MONTH.
  • We refinanced (somehow) with Regions in 2010 at a much better rate. It appraised for $210K, the mortgage was for $247K. We were now losing "only" ~$600/month.
  • Our tenant left at the end of 2010, and the place sat empty for 4 months. I thought about selling it then but decided to keep renting it out and wait for things to turn around. I even made the 300 mile round trip 8x to show it to prospective tenants on the weekends. We finally rented it out for slightly less than the previous tenant. We're now losing ~$650/month.
  • Our current tenants' lease is ending soon, and we just want to get rid of this alligator! We still owe about $240K on it, and it's probably worth ~$200K.
  • We do own another home which we were able to buy in 2008. It's still our primary residence, and we have some equity in it (it's in a remarkably stable part of Illinois, and we spent a year fixing it up).


We are 'accidental landlords' and sick of renting this condo out and losing thousands of dollars every year. We've put off kids, grad school, vacations, etc. We tried to do the right thing by renting it out and waiting for the market to come back, but obviously that didn't work for us. This was never meant to be an "investment" property, and we just want to move on. It feels like "death by a thousand cuts" every month we mail our mortgage payment and HOA fees.

So my question is this: should we try to do a short sale, or should we just walk away?

I'm leaning towards SS since both MO and IL are recourse states. But I'm worried that our bank won't give us much leeway. We finally have some money in savings (only because my wife took on a second job, but we are certainly not rolling in the dough). I don't mind bringing some money to closing (for say, $5-10K), or even taking on a promissory note (for say, $10K-$15K at 0%).

However, if we do try the SS route then we really can't afford to make our mortgage payments while it sits empty awaiting a buyer. A few months of that, and our hard-fought savings would be wiped away (which is what happened in early 2011 when we were looking for a renter). I also don't want to show the bank our financials. Like I said, we FINALLY have a surplus in cash now (no credit card debt, no car loans) and save quite a bit for retirement, so they may not be willing to forgive any debt.

I've daydreamed about just mailing Regions the keys when our tenants move out, but I'm worried about a deficiency judgment down the road. I honestly don't care about the impact on our credit. I plan on living debt free after this horrible experience anyway. But I'd hate to get the dreaded 1099-C or have my wage garnished.

I plan on speaking with both a local attorney and CPA soon, but I want to hear some unbiased opinions and real experiences first. Also, what kind of attorney should I talk to? We want to avoid bankruptcy, if possible (if for nothing else then pride).

I've been kicking myself for the last 6 years for:

1. buying at the height of the bubble
2. buying at the age of 23, and
3. buying in an "emerging" neighborhood (downtown STL).

I've been in denial and unwilling to admit defeat. But this was a terrible financial decision, and now I'm ready to cut my losses. I just don't want to lose my shirt to make that happen.

Any ideas or shared experiences would be a tremendous help. Thanks!