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Strategic Foreclosure


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2010 May 30, 3:35pm   24,245 views  54 comments

by jrc   ➕follow (0)   💰tip   ignore  

I have lost $300,000 in 4 1/2 years since I bought my home. Wife and I held out hope until December 09. Bank refused to even talk with us in late 08 and twice in 09. Stopped paying mortgage in December. Put $191,000 down and took out a $400,000 loan. Home went from $618,000 to $225,ooo last April. Loan balance is $400,000. Simple math, major negative equity. Wells Fargo has been jerking me around, can never speak to anyone that has any decision making ability, its like a big secret. Last letter they sent, they want me to pay a "reduced" payment over the next 3 months totaling $4000.00. The letter stated even if I agree to make these payments there was no guarantee they would modify my loan. I told them the only way I agree to anything is if they modify my PRINCIPAL balance to CURRENT market value, otherwise no deal. Of course the people on the phone can't tell what kind of modification they would do if any.My question is this. I received my property tax bill last week. I was told by a couple of people, including a gentle from youwalkaway.com, that I DO NOT pay those taxes if I plan to foreclose. I was told the back taxes would be the responsibility of the bank or the new owner of the property whoever that may be. Does anyone have any factual knowledge of this or should I bite the bullet and pay the taxes even though I am not making mortgage payments? I just don't want anything coming back on me later on down the road. I live in California and I know its a non-recourse state. Any advice from people with specific knowledge would be great.Thanks

#housing

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1   Â¥   2010 May 30, 4:17pm  

I know its a non-recourse state

Not if you've refi'd the original loan.

I told them the only way I agree to anything is if they modify my PRINCIPAL balance to CURRENT market value

Go eat a dick. "heads I win tails you lose" is BS. I've been renting since 2000 since I didn't want to jump into this market, and my corporate LL would give me about 3 days to get my act together should I be late for a rent payment.

Having said that, you did everything "right", except putting 30% down (that was unnecessarily non risk-adverse) and I feel for you. I was mega-bearish starting in 2004 and I never thought property values would tank as they have, it was only when the Casey Serin serial fraud story broke in late 2006 did I have a better picture of the true situation.

As for your question, while I am in no way a tax attorney, I believe unpaid taxes show up as liens on the property, and since you are going to default on your loan and give the property back to the bank, it would make no sense to pay them.

This thread:

http://ficoforums.myfico.com/t5/Bankruptcy/Delinquent-property-taxes-after-chapter-7-bankruptcy/m-p/610980

bears this out.

2   kt1652   2010 May 31, 1:52am  

Lets use your numbers for argument's sake.
If you lost 300K already, I'd not call it strategic foreclosure.
Maybe terminal foreclosure?

3   jrc   2010 May 31, 2:59am  

PTIMANN

I attempted to refi last April with a Wells Fargo agent. After a few phone calls he assured me he (they)would help me. He locked me in at 4.6% interest rate 30 year fixed. After I shelled out $450.00 for an appraisal, that Wells chose, it came back at $255,000.
He called me to let me know that wells could not refi due to the loan to value ratio. He stated they would help me. From that point on neither he nor his partner called me back or returned any of my e-mails, they just ignored me. I went to the county accessors office to give them a copy of the appraisal to adjust my property taxes and they told me the county accessor valued the property at $225,000.

I live in central California where we got hit really hard, esp in our county.

I purchased the home in 03/2006 for $591,000, it was appraised at 618,000. I put $191,000 down financed $400,000 at 6% at a 5 year ARM. We did this because we did not plan stay after our son goes off to college. Who would of thought this would happen to the market. I never expected the home to be worth a million dollars, I know the market fluctuates, this is my second home I have owned, but I did not expect to lose all I had invested than some. I figured at worst when it was tme to sell we might lose a little of our investment just due to the normal real estate ups and downs.

Now we need to sell in order to relocate, but I cant sell the home for obvious reasons. I contacted Wells in 08 when values started to plummet and they did not even want to talk with me. I called twice in 09 and they again refused to do anything for us. Told us point blank unless i fall 90 days behind, none of the "programs" would help us.

The letter they extended to us for $1333 a month is a 3 month "trial program" as they call it. No interest rate, no terms. After we shell out $4,000 more dollars, they will "review" the loan modification again and resubmit for review. They can't tell me what kind of loan mod, IF ANY, they would offer me. Its just another way for the bank to squeeze some more out of us. I have already accepted we will let our home go. The market, at least in California, will NOT ever get back to where it was, or even close to what my loan is right now. I have to do what I have to do.

4   Â¥   2010 May 31, 3:23am  

jrc says

I have to do what I have to do.

Indeed. Defaulting on a loan is, technically, not a "wrong" thing to do. People are allowed to break a contract, they just generally have to live by the terms of the contract, what it says happens in default.

Big corporations default on their loans all the time. Again, I am no real estate lawyer nor am I experienced in this area, but my understanding is that doing a "deed in lieu of foreclosure" is your best bet.

If you haven't refi'd, your loan is a purchase money loan and your lender generally won't be able to pursue you for their losses.

California actually established these "purchase money" loan provisions exactly for this reason, to have banks carry the risk of default, because in a now-forgotten past they loved to rope people into mortgages they couldn't afford and then pursue them forever when they defaulted.

we shell out $4,000 more dollars

$1300/mo seems like a fair deal to live in a house you thought was worth $600,000 to you at one point.

Who would of thought this would happen to the market

If it is worth $225K now, chances are it was worth $225K in 2001. You happened to buy at the exact price peak, it was all downhill from there.

This is Salinas, but the Valley generally followed this pattern too:

5   Â¥   2010 May 31, 4:29am  

Additionally, Congress has eliminated taxation on loan forgiveness through 2012:

http://www.irs.gov/individuals/article/0,,id=179414,00.html

6   jrc   2010 May 31, 6:35am  

Thanks a lot Troy for the information. I too am aware of that loan forgiveness act, thank God for that. Those punks at the bank already dinged our credit rating. My wife had 840 and mine was high 740's. Oh well, in a few years we will build it back up.

7   Leigh   2010 May 31, 12:04pm  

And in today's NYTimes...Owners Stop Paying Mortgages, and Stop Fretting

http://www.nytimes.com/2010/06/01/business/01nopay.html?pagewanted=1&src=busln

Meanwhile this prudent, lowly renter is getting screwed. Doesn't pay to play by the rules any more.

8   thomas.wong1986   2010 May 31, 10:17pm  

Troy says

If it is worth $225K now, chances are it was worth $225K in 2001. You happened to buy at the exact price peak, it was all downhill from there.

And there were people on discussion boards and in the media justifying prices north of $400K and beyond for the past decade. What insanity!

9   thomas.wong1986   2010 May 31, 10:22pm  

Leigh says

Meanwhile this prudent, lowly renter is getting screwed. Doesn’t pay to play by the rules any more.

Stick to your guns Leigh! Prices will continue to correct. Descipline does pay off at the end.

10   TType85   2010 Jun 1, 4:34am  

jrc says

I purchased the home in 03/2006 for $591,000, it was appraised at 618,000. I put $191,000 down financed $400,000 at 6% at a 5 year ARM. We did this because we did not plan stay after our son goes off to college. Who would of thought this would happen to the market. I never expected the home to be worth a million dollars, I know the market fluctuates, this is my second home I have owned, but I did not expect to lose all I had invested than some. I figured at worst when it was tme to sell we might lose a little of our investment just due to the normal real estate ups and downs.

I might sound like an a-hole for saying this but...

You gambled, you lost.

You do not deserve a cramdown; nor does anyone else.

It was pretty obvious even in 2005-2006 that there was no real support for prices that high. If you did not see the warning signs it's your fault.

Time to walk away and lick your wounds.

11   thomas.wong1986   2010 Jun 1, 5:03am  

Foreclosures are going upscale across the Bay Area.

Nearly 1,000 homes valued above $730,000 were repossessed by banks in the nine-county region in each of the past two years, according to a Chronicle review of public records compiled by MDA DataQuick, a San Diego research firm. This year is on track for similar numbers, with 223 homes in that price bracket repossessed by banks since January.

Back in the real estate boom year of 2005, just 42 Bay Area homes valued above $730,000 went into foreclosure; in 2006, the number was 80.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/05/31/MN3M1DKGLM.DTL#ixzz0pd5quSeq

12   vain   2010 Jun 1, 5:18am  

Now were those $730k homes that were really worth $730k? Or $400k homes that were priced at $730k? :)

Looks like the latter.

13   pkennedy   2010 Jun 1, 6:09am  

42 to 223 isn't a massive jump either.

While it's a 5X increase, it's a fairly small number that became a slightly less small number.

14   elliemae   2010 Jun 1, 12:53pm  

Shouldn't you be asking a tax attorney instead of us? Nowhere in your post did you say that you had a reduction in income or a hardship that made it difficult to pay. You've made a choice, not sure what you want from us.

If you aren't paying your mortgage, you can probably save up enough to pay cash for a house at auction.

Leigh, you're right. We people who either rent or bought low and didn't gamble and cash out like an atm aren't being rewarded at this point. At least we don't have all the stress and won't have our credit ratings blown, and didn't lose $200k gambling.

15   Storm   2010 Jun 2, 2:36am  

You guys are being pretty harsh on jrc. In my opinion, he did everything right. Huge down payment; probably had more than enough income to support a 400K mortgage.

Honestly he should have done more market research and realized that we had a bubble at the time of purchase, but he didn't.

In my opinion - try as hard as possible to remove all emotion and "morality" from the question - your house is an investment - do what any investor does and analyze the pros and cons of strategic default. If it makes sense to walk away and take the credit hit instead of sinking more money into a negative equity situation - then walk.

The people that really make me want to reach out and throttle them are the idiots in the NYtimes article - bragging about how now that they don't have a mortgage payment they can eat out at Outback steakhouse and keep spending all the money they shouldn't have... complete morons.

Smart strategic defaulters are living for 2 years rent free and saving every penny for their retirement. Stupid (most likely extremely obese) bubbletards are eating out at Outback and will have negative net worth their entire life on this planet - we really need to take the safety labels off everything and let the gene pool get cleaned out a bit... ;-)

16   CSC   2010 Jun 2, 7:23am  

For those who gambled and lost, no I don't think it's to be expected that the bank would reduce their principle. However, for those who can prove fraud or at least predatory lending, perhaps it is correct to force banks to reduce principle.

Unless you were really into researching the housing industry and all its warts and legal problems by AT LEAST 2001, you would be unlikely to have found evidence in time that housing was in a bubble, know to avoid it, and realize that industry forces were driving it. Buyers were fooled in droves. Blaming buyers is EASY but it's way over simplified and in some cases wrong.

Homeowners who think their houses were worth those high prices are understandably mad, and right to be angry at the industry that misled them, but they are also in denial. Their houses were never worth that, and will not likely be again unless incomes rise to the levels where prices are at 2 to 3 times the median income. The attemps to make prices rise again are only detrimental to real recovery. Housing's inflation was created to benefit the real estate and mortgage industry, period. IMO many crimes were committed that will never be punished because the top players have been paying fines to the govt in lieu of criminal charges. The little businesses, the small builders, brokers, real estate agents, etc, caught and sentenced, are blips on the radar, soon to be forgotten if they were ever noticed, (by most people). Most are never caught because law enforcement doesn't have the resources, and unless a bank is also a victim, law enforcement often tells people to sue in civil court, individual cases which rarely pay enough to interest lawyers.

17   knewbetter   2010 Jun 2, 8:10am  

Don't pay a dime and wait for them to send you a letter.

From what I've heard, the loan mods are a scam. The bank is reimbursed the cost of the temp write down, that's why most of them only go 3 months before the bank makes you jump through the hoops again.

18   jrc   2010 Jun 2, 10:46am  

lyoungblood says

You guys are being pretty harsh on jrc. In my opinion, he did everything right. Huge down payment; probably had more than enough income to support a 400K mortgage.
Honestly he should have done more market research and realized that we had a bubble at the time of purchase, but he didn’t.
In my opinion - try as hard as possible to remove all emotion and “morality” from the question - your house is an investment - do what any investor does and analyze the pros and cons of strategic default. If it makes sense to walk away and take the credit hit instead of sinking more money into a negative equity situation - then walk.
The people that really make me want to reach out and throttle them are the idiots in the NYtimes article - bragging about how now that they don’t have a mortgage payment they can eat out at Outback steakhouse and keep spending all the money they shouldn’t have… complete morons.
Smart strategic defaulters are living for 2 years rent free and saving every penny for their retirement. Stupid (most likely extremely obese) bubbletards are eating out at Outback and will have negative net worth their entire life on this planet - we really need to take the safety labels off everything and let the gene pool get cleaned out a bit… ;-)

lyoungblood says

You guys are being pretty harsh on jrc. In my opinion, he did everything right. Huge down payment; probably had more than enough income to support a 400K mortgage.
Honestly he should have done more market research and realized that we had a bubble at the time of purchase, but he didn’t.
In my opinion - try as hard as possible to remove all emotion and “morality” from the question - your house is an investment - do what any investor does and analyze the pros and cons of strategic default. If it makes sense to walk away and take the credit hit instead of sinking more money into a negative equity situation - then walk.
The people that really make me want to reach out and throttle them are the idiots in the NYtimes article - bragging about how now that they don’t have a mortgage payment they can eat out at Outback steakhouse and keep spending all the money they shouldn’t have… complete morons.
Smart strategic defaulters are living for 2 years rent free and saving every penny for their retirement. Stupid (most likely extremely obese) bubbletards are eating out at Outback and will have negative net worth their entire life on this planet - we really need to take the safety labels off everything and let the gene pool get cleaned out a bit… ;-)

Thank you. I read that article also. I am saving as much as I can, paid off our only credit card and sticking money into the bank. We are actually living leaner than we did before this.

19   jrc   2010 Jun 2, 10:50am  

Got a letter yesterday from Hells Fargo. They sent my "case" to their attorneys to start the foreclosure process. The lettered stated I still can pay the mortgage due in full. Yea, I have $400k laying around, the checks in the mail. Morons. I guess I still have about another 4 months before I get "evicted". From the research I have done and people I have talked to in same situation, its seems to take at least 4 months for the bank to complete the whole process.

20   B.A.C.A.H.   2010 Jun 2, 2:15pm  

jrc,

If you commute from Hollister, consider your relocation as a "gift opportunity" to relocate closer to the job, because those long commutes are not viable over the long term.

All the stars have to be aligned, everything has to jive, to make it practical and come out OK. Broken car, illness in the family, illness (or sudden unemployment) of the carpool partner, traffic conditions, gasoline prices, insurance rates, shift schedules, after work responsibilities at home, un-expected and un-welcome, but "required" overtime, any one of these things can screw it up, but it seems like more than one thing at a time can conspire to make it a whack-a-mole treadmill.

The only folks I know who've made it work over the long haul work on compressed shifts that straddle the weekend. But even then, they miss all the social life at home that goes on in the weekends.

21   Vicente   2010 Jun 2, 3:12pm  

jrc says

I guess I still have about another 4 months before I get “evicted”.

A couple I know lived in Sacramento, and stayed in the house for 1 year after their last payment. Actually they left and moved to start over in another state, so I dunno how long it would have taken for an actual eviction. I have heard it takes up to 2 years now.

22   jrc   2010 Jun 2, 3:37pm  

sybrib says

jrc,
If you commute from Hollister, consider your relocation as a “gift opportunity” to relocate closer to the job, because those long commutes are not viable over the long term.
All the stars have to be aligned, everything has to jive, to make it practical and come out OK. Broken car, illness in the family, illness (or sudden unemployment) of the carpool partner, traffic conditions, gasoline prices, insurance rates, shift schedules, after work responsibilities at home, un-expected and un-welcome, but “required” overtime, any one of these things can screw it up, but it seems like more than one thing at a time can conspire to make it a whack-a-mole treadmill.
The only folks I know who’ve made it work over the long haul work on compressed shifts that straddle the weekend. But even then, they miss all the social life at home that goes on in the weekends.

You are correct. I look at this as an opportunity to start over. My wife and I commute 5 days a week, me from hollister to seaside and her from hollister to salinas. We will save $500 easy a month just in gas reduction. I have to look at the positives, because thats all I have now.

23   seaside   2010 Jun 2, 4:01pm  

Hmmm... first, let me think... Nope, I don't see you comming to me 5 days a week. lol.

At least you made quite lot of downpayment, and that made me belive you're a clueless got caught in the middle rather than one of those morons. You're foreclosure just got started and you may have more than 4 monthes due to exploding numbers of foreclosure. You still can try shortsale if that's what you want. Then, make sure you hire someone who knew the stuff. If you take the path to foreclosure, make sure you save everything you can, don't waste a thing, use it forward your next home purchase or apartment rent. It's good to be liivng in non-recourse state, ain't it?

24   MarkInSF   2010 Jun 2, 5:47pm  

seaside says

It’s good to be liivng in non-recourse state, ain’t it?

Why should it be any other way?

I own some shares of an apartment REIT. I own real estate through stock shares. If the tenant's rent isn't enough to cover debt service, and the bank forecloses, it would be pretty absurd for the bank to come after ME to make up for any deficiency. In fact they can't. Investors in corporations can never lose more than they invested.

I don't see why the home investor should be held to a different standard.

25   maxweber   2010 Jun 2, 11:53pm  

Bern scammed billions. You gotta work through the government to get the real big transfers from the taxpayer into your bank account. The bank has little to no incentive to give you money. Although BofA apparently is cramming down because strategic foreclosures are skyrocketing (30% of all foreclosures). Congress, OTOH, give to whomever sits in government. $41K down per man, woman, and child. What's another $10K or so!!! So, I'll bet you can hold out and government will pay your cram down (well, I should say ME since I was one of those idiots who rented because I knew I didn't make enough to pay $750K for a $70K house in San Francisco! Actually, I went IO on a 1BR in 04 and got out as soon as I could in 05 because I realized what a mistake I had made and how precarious my position was... those condos are just now starting to roll over however. Tons of money in CA and SF. For now.).

26   commonsense   2010 Jun 3, 12:25am  

There is an inherent problem in my personal opinion that I see in the greater scope of real estate over the past ten years ...and that is the belief that this 'pricing' of the past seven plus years was in anyway honest and solid. I would never think in my wildest imagination of paying 300K let alone 700K for an average or worse property regardless of location. If someone sold a place during this lunacy and then proceeded to put large money down on another grossly overpriced house ...sorry, but that person has to eat it alone. There is no free meal. No one had a buyer by their throat to buy anything (or take out any loans for anything.) I didn't. I am not sitting on a 700K debt for anything let alone something worth less than 250K, but if I was I certainly would not cry about it like a little girl or look for a free ride. Men have to man up and take responsibility for their actions regardless of the consequences ...that is my take on the bigger reality, that is called being a MAN. End of story.

27   nancy53yankee   2010 Jun 3, 1:07am  

been in real estate 40 years the answer u seek do not do not pay pay the taxes pay nothing taxes assesments etc the whole mess goes as a lien against the real estate u are not responsible for this mess the federal reserve is they are the ones that created the money out of the air now the money is going back into the air as they cannot revive the imploding ponzi scheme stand back 2010 will look like paradise compared to 2015 as the currency collapses

28   maxweber   2010 Jun 3, 1:15am  

nancy53yankee, you deserve a prize!

29   romeotybalt   2010 Jun 3, 1:17am  

I happily walked away from my 350K nightmare in Chicago for a 60K bank foreclosure. I lived rent free for over a year saving over 40K, eventuall giving the place to the bank. But before I left, I took cabinets, countertops, appliances and fixtures.

Do I feel guilty? Hell no. Walking away is the market risk that the banks assume, as I have assumed the risks of poor credit and a deficiency judgement.

However, not having a mortgage allows me to send my kids to decent schools and save for their college.

30   GaryA   2010 Jun 3, 2:11am  

OCExRenter says

jrc says

I purchased the home in 03/2006 for $591,000, it was appraised at 618,000. I put $191,000 down financed $400,000 at 6% at a 5 year ARM. We did this because we did not plan stay after our son goes off to college. Who would of thought this would happen to the market. I never expected the home to be worth a million dollars, I know the market fluctuates, this is my second home I have owned, but I did not expect to lose all I had invested than some. I figured at worst when it was tme to sell we might lose a little of our investment just due to the normal real estate ups and downs.

I might sound like an a-hole for saying this but…
You gambled, you lost.
You do not deserve a cramdown; nor does anyone else.
It was pretty obvious even in 2005-2006 that there was no real support for prices that high. If you did not see the warning signs it’s your fault.
Time to walk away and lick your wounds.

OC X renter there is always a jerk in the crowd. The fault of this house price bubble and crash lies primarily with the lenders who at Basel 2 allowed off balance sheet banking in 1997. The easy money that resulted from the same kind of fraud that Enron practiced (but is legal because they are banks), resulted in inflated prices.

If you can't see this you are stupid. And yes, OC X renter, I think you are as thick as a brick.

31   GaryA   2010 Jun 3, 2:14am  

commonsense says

There is an inherent problem in my personal opinion that I see in the greater scope of real estate over the past ten years …and that is the belief that this ‘pricing’ of the past seven plus years was in anyway honest and solid. I would never think in my wildest imagination of paying 300K let alone 700K for an average or worse property regardless of location. If someone sold a place during this lunacy and then proceeded to put large money down on another grossly overpriced house …sorry, but that person has to eat it alone. There is no free meal. No one had a buyer by their throat to buy anything (or take out any loans for anything.) I didn’t. I am not sitting on a 700K debt for anything let alone something worth less than 250K, but if I was I certainly would not cry about it like a little girl or look for a free ride. Men have to man up and take responsibility for their actions regardless of the consequences …that is my take on the bigger reality, that is called being a MAN. End of story.

You don't have much common sense, common sense. What I wrote here applies to you as well:

"OC X renter there is always a jerk in the crowd. The fault of this house price bubble and crash lies primarily with the lenders who at Basel 2 allowed off balance sheet banking in 1997. The easy money that resulted from the same kind of fraud that Enron practiced (but is legal because they are banks), resulted in inflated prices.

If you can’t see this you are stupid. And yes, OC X renter, I think you are as thick as a brick."

32   tatupu70   2010 Jun 3, 3:12am  

GaryA says

“OC X renter there is always a jerk in the crowd. The fault of this house price bubble and crash lies primarily with the lenders who at Basel 2 allowed off balance sheet banking in 1997. The easy money that resulted from the same kind of fraud that Enron practiced (but is legal because they are banks), resulted in inflated prices.

Gary--there is plenty of blame to go around. Just because someone offers to loan you $1MM doesn't mean you have to accept their offer when you have no hope to pay them back. If you take on too much debt, then you are definitely part of the problem.

33   m1ckey6   2010 Jun 3, 4:51am  

What is with all the hate? Those acting holier than thou have certainly made dumb mistakes in their lives. This guy is choosing to stop making a dumb mistake and should be congratulated.

To answer the question the city does not come after the ex owner to pay back taxes after foreclosure/short sale.

The advice to talk to a lawyer is good advice - a really good one will cost $300 for an hour and if you prepare all your questions in advance an hour is all you need. This is not hugely necessary but will allow you to sleep easy.

Look into current California law regarding tax implications of the forgiven debt amount - the exemption to this may have expired.

A foreclosure or a short sale have almost identical impact on your credit score despite some of the advice given above.

You will find that most landlords could care less about a foreclosure/short sale these days - they usually laugh and say "Yeah, everyone has one of those". There is the odd d..k (like the sanctimonious people claiming to be perfect on this forum) but the most common response is to add a token amount like $200 to your deposit.

You are likely to be able to stay for far longer than four months. At the moment in California one year is more likely. This depends a lot on who your lender is but the banks would rather have you in there than have the place empty as a general rule.

You have the right to stop making a mistake once you've realized you have made one. God bless.

34   rob918   2010 Jun 3, 7:24am  

Mickey6 said "You will find that most landlords could care less about a foreclosure/short sale these days - they usually laugh and say “Yeah, everyone has one of those”. There is the odd d..k (like the sanctimonious people claiming to be perfect on this forum) but the most common response is to add a token amount like $200 to your deposit."

You may be right about some landlords, but this one cares a lot. I have told the management company not to waste my time or theirs when my places become vacant (which is very rare I would add) because I won't rent to forclosure/short sales/walk-a-ways.....credit reports don't say if it was walk-a-way, etc. just that it wasn't paid as agreed. If someone was late here and there and didn't make a habit of it I can handle that. There are too many good tenants out there to fool around with people that have walked away from their mortgages. In March I had an opening and the place was turned around in 20 days with several good potential tenants turning in applications. Every time there is a vacancy, I use that time to make upgrades, etc. If the management company is good, they have lots of crafts persons on their list and can get things turned around quickly.

35   rob918   2010 Jun 3, 11:19am  

Hi shrekgrinch: I'm in Pasadena now with places in Glendale and Pasadena. The real estate market and rental prices are good and solid here. I didn't have to lower my rate when the tenant moved a few months back. The management company said that it was right on target and they were right. That's what I pay them for; no hassles and expertise. I grew up and lived in the bay area for many, many years so I am intimately familiar with that area as well. I sold my rental properties up there about 10 years ago because I am not one to be an absentee landlord...... too far away for me. I am fortunate that I was always a landlord because I wanted to be, not an accidental landlord because I was upside down and in trouble trying to keep them. Mind you it wasn't because I was smarter than anyone else, just lucky LOL.

36   klarek   2010 Jun 3, 1:27pm  

You're mad that the house's value has dropped below what you owe.... I'm so sorry to hear that. Same thing happened to my car, my sofa, and my now-deceased pure-bred chihuahua.

So the problem is that you HAVE to sell because you're moving, right? Here's a suggestion: Stop being a greedy douchebag begging for a principal reduction (free money) and rent the house out. You know, let people pay you while they live there, and you can pay your mortgage and reclaim your title of non-deadbeat. Maybe you'll take a monthly loss, but I'm sure if you adjust your lifestyle to that of the average person that makes way less than you, you'll get by just fine. Shit, it might even be humbling! And if the monthly loss is more than a little, then you're a fucking idiot for not looking at the rental comps when you bought.

"Hey honey, why are we paying over twice the amount per month on our mortgage than it would cost to rent this same house?"

"Remember our conversation the day we closed? If we don't own, then we'll be piece of shit renters. How can we become the very people we're supposed to look down upon?"

37   Free money!   2010 Jun 3, 4:43pm  

I think anyone who wants to walk away from their home, they should do it. only that way the housing market can correct itself. because there will be a massive amount of house in the banks hand and they won't have enough FED money to save them. that been said. I am still renting, I didn't buy a house when I know I can't afford it, ( but I could have bought it in 2006) and I don't have a PHD degree, but I can calculate that I won't be able to make the payment when the interest rate start to move. People! you got yourself in this trouble you shouldn't expect using other people's tax dollars to pay for your house!

38   MarkInSF   2010 Jun 3, 4:54pm  

klarek says

You’re mad that the house’s value has dropped below what you owe…. I’m so sorry to hear that. Same thing happened to my car, my sofa, and my now-deceased pure-bred chihuahua.

More like the pawn shop is mad that they lent $1K with a sofa as collateral, only to discover later that the same sofa is going for $500. The guy who pawned his sofa is rightly deciding it makes no sense to pay the $1K + interest back. Just let the pawn shop keep the sofa.

39   Cain   2010 Jun 4, 12:56am  

shrekgrinch: love the avatar, awesome game!

I would say if you are wanting lots of info on how to go about walking away, that website loansafe.org may be your best place to go. Say what you want of some of the people there, but, lots of info.

As for your situation that others are going through as well, maybe this all goes to a fundamental problem on how we view houses in general compared to other big purchases like say a car.

When you buy a new or used car, you go in knowing that it will depreciate. It won't be worth more than when you bought it in general, let alone hold its value as it relates to inflation, or better yet, make money off of it.

Housing though we expect to hold its value or increase, and worse yet, this time we had it go nuts pricewise and people thought that was great.

never understood that, still don't.

40   m1ckey6   2010 Jun 4, 2:03am  

Rents aren't falling and vacancies aren't increasing?! Oh dear God, what planet are you geniuses from? You manage to rent your properties in a reasonable time frame so the entire market is great?! We get it - you own rental property.
Rob918, I believe I covered people like you in my original post. Anyone landlord with a functioning brain will jump on a short sale/foreclosure potential tenant. They will have paid well above the rent you are asking for years so they will have plenty of free cash flow to pay the rent. The guy that started this thread put down $191k as a deposit on his house - how many of your tenants do you think have ever saved this amount?
Low level landlords like you guys tend to have God complexes (and yes, I too have been a landlord for many years). I am saving up my reserve of schadenfraude for when guys like you go to the wall - and you will, because you will simply be too dumb to recognize when you finally do have to lower your rents and will stubbornly hold out for that tenant with 720 FICO, a good job and the willingness to pay above market.

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