House Trouble: What would you do? (Phoenix, Tolleson: section 8, short sales, real estate)

[Arathrax]

Hi gang. I'm faced with an unpleasant situation and would like some advice.

We have a very nice house in Tolleson (3 bed, 2 bath, 2 car garage, pool, 2200 sq ft) and unfortunately bought at the top of the real estate bubble 3 years ago.

Due to job circumstances, I had to take a job in Seattle where I've been in for the last 8 months (in my line of work Phoenix provides no other options). My wife stays at our house in Tolleson but this just too much of a drain on our finances supporting both households. I need to get my wife up to Seattle ASAP. This is not a good situation and causing us quite a bit of stress, financially and emotionally.

Bought the house in the 280k range. Currently the same house on our street is going for 150 ish (even these aren't moving). Any equity we had in the house from our downpayment is gone. The neighbors arent the greatest either. We just want to be rid of this place.

Our mortage company (American Home Mortgage) is gone and the mortgage has been sold to another company.

I see a few options none of them good.
1. Try and get the bank to do a short sale.
2. Rent it (just yesterday there was a drophouse busted less than a mile from where we live with 53 illegals) Additionally with the glut of foreclosures and investors trying to rent, we'd have to rent at way below what our monthly mortgage payment is including much stress of being an out-of-state landlord. Basically, I have way too many trust issues that things would work out in this department. Heard horror stories about people renting, and about local management places being overwhelmed. Maybe I am wrong?
3. Jinglemail. Just send the keys into the bank and rent a house in Seattle before the credit hit comes. Rebuild the credit over a few years. How long can you stop paying on the house before eviction notices start? 3 months? 6 months?

Any suggestions? This is causing my family much stress. We have excellent credit (mid 700s), but are currently living paycheck-to-paycheck due to these circumstances. I don't want to walk away from this house but it's looking like the only real option.

Thanks in advance.

[desertsun41]

I just want to add that you are not alone. I doubt that makes you feel any better. To make it worse there are many who point fingers and call these victims bums. Stupid. Can't manage their own money. Took on more then they can afford. But these big mouths are sitting pretty because they were not a victim of timing. Because they have good jobs. Because they have no need to move. They have no idea of the fact that there are people in the world with less money then them.

Many many people are purchasing a new home elsewhere before allowing their other home to foreclose. There are a few restrictions because one has to be called a 2nd home and one a primary so you will have to do whats right and lie through your teeth.

If all else fails, rather then just walk away from the house, call the lender and tell them you want to offer them "cash for keys". These lenders are taking back homes that the borrowers have demolished. The lender will almost rutenly offer you $2000 or more ( you can negotiate more) for in return give them the house in tip top condition.

Cash for keys

“Cash for Keys”

I wish you luck. But dont worry. The govt tells us there is not a recession. Everything is ok. The economy is running like a locomotive. I think they are referring to Canada.

[crewbank]

Yikes! Wish I could say this is the first time I have heard this story, but you are definitely in good company...mostly working families like yours who had bad timing and entered a volatile market. The fed is starting to recognize this and has offered billions in FHA bailouts to people whose mortgages are still set at the pre-crash rates and terms. With your credit and good reason for needing to relocate, I think you could qualify for a low fixed rate refi, and at least rent without losing money. No, renting is not ideal, unless you are very careful about screening tenants, but it's better than taking a MAJOR ding in your credit and finances.

Maybe I'm naive, and you would have to lie in order to get qualified as an owner in residence to get FHA money, but there has to be an option through the new program. Find a good mortgage broker who deals in extraordinary situations. I recommend Inventive Home Lending. They are very knowledgeable and went to bat for my wife and I when we were struggling to get into a home a couple years back.

[borborygmi]

Just walk away. Hey, why not? Seems irresponsible, but the fact is that thousands of other people in your situation are doing just that. Read here:

New mortgage crisis looms - Buy a House: MLS Listings & Home Buying Tips - MSN Real Estate

[artvandelay]

Wow. If you hadn't read my post, I was the one asking about voluntary foreclosure, ie jinglemail. I am in Tolleson too, and my down pmt is long gone. My estimated home value is 90K lees than appraisal 18 months ago (30%).

Since you have your biggest hurdle out of the way (new job), I think you should pack up and let the foreclosure begin. I'm not an expert on short sales, but I've heard only bad things. If moving on with your lives is the goal, I say get your things moved and have your family back with you.

I'm of the thinking now that home ownership is a decent but WAY overrated way to grow wealth. It should be primarily for shelter. You could rent in Seattle while you repair your credit, and you wouldn't get imprisoned by a house payment like many are.

Whatever you choose, good luck, and keep your marriage and job as higher priorities than any mortgage company or short-term credit score.

[MotleyCrew]

What is troublesome is if you do a short sale you will be held accountable for the difference by the Fed. I think AZ is a non recourse state so not to worry there. Good luck in buying another house before handing this one to the bank. Lots of folks in your situation.

[desertsun41]

As crewbank has mentioned there are a couple bailout/fix-it bills in congress but ol bushy the Dictator "The Decider" already promised to veto them. He says there is no recession and no housing crises. It must be nice to live such a sheltered life. Never having to ever cross paths with regular folk.... you know, the other half.

Many are holding on by a string just waiting to see if help can come on time.

Most people are decent working class people who did not buy something they could not afford just to be irresponsible. They want to keep their homes but the lenders are refusing to help in any way. Rather then modify a loan they would rather take the house at great cost to them. Then ultimatly sell it at a gigantic loss.

This makes no sense to borrowers. It is what fuels the anger which causes them to do the damage to these homes.

[Arathrax]

Thanks for your replies gang.

I'm wondering if I should even call the bank and let them know what we're up against. I'm sure some lowly call center employee could give a flip about our current situation.

I really doubt our govt is going to help my family out of this situation. Honestly, I don't really blame the govt nor do I expect them to bail us out. We're just victims of a perfect storm of bad timing and economics and banking greed.

So could anybody describe the bad things about short sales? If AZ is a no recourse state, then we're not liable for the difference correct? So what else would be the issue?

Maybe converting the house to a Section 8 rental? That would break my heart as this house is REALLY nice. I'd think most people would kill to rent this house lounging in the backyard pool with waterfall, surrounded by really lush foilage and all the flowers. <sigh>

Thanks all for your replies.

[sablebaby]

You're responsible for income tax on the difference, which could be a lot to pay.

[Beena]

Markets tend to over correct, so before this is all said and done, expect the values of the houses in the outlying areas to dip below the affordability range (3 x median income) and then eventually come back up to some level of affordability. So in short...we are probably a long ways from seeing the bottom. If you were to rent it out and wait for the value to return to 280, you could be renting it for a decade or longer. The monthly loss over that long term could be devastating.

No walking away is not the right thing to do from a moral standpoint. We all committed to our debts and signed on the dotted line. However....

You can move back and take a different job and try to make it work. Or you can pretty much see what only your other option is.