patrick.net

I think you need to work on the taxes and HOA fees.

HOA fees have no business being over $75 if the building is anything like the millions of those buildings strewn all over South Florida. Sunrise lakes, Halendale, Hollywood, Hollybrook...

I'd try to talk to all of the home owners and work on lowering your HOA fees and City taxes on the place. Get it appraised at something you feel comfortable paying taxes on. Like 120K or so.

and Get remortgaged at 4.5% or walk away.

I think it's best way accross the board is to do a price reset to '99 prices, and get financed for what you owe of course, but at 4.5% or even less for these cases.

The market isn't going to turn on a dime, and putting your selves through this misery expecting some miracle will break is lunacy. It's not going to get any better, this is it.

Take your lumps scale back on your optimisim of what you think the value is, and get the taxes, and other fees based on home values down as much as possible.

Eventually IF and WHEN RE does turn around. It will work its way back up from there. And who knows when the Economy booms again, you may dodge the Mortgage bullet and one day unload it on someone else for 300K or at least the balance of what you may owe it when that time comes.

But in the meantime these fees are insane and were born out of the RE exuberance of the bubble and do not reflect realistic HOA values in a real world.

300 a month is more than a home in Broward county based at 220K monthly tax bill.
Where do these HOA's get off with this crap?

Sounds like you are seriously screwed. Like many people who bought in '06, in retrospect it wasn't such as good move.

1 - Walk away (save your payment monies for the year or so it takes for them to foreclose) but continue to pay HOA & insurance. HOA might be able to evict you sooner if you stop paying them. I'm not sure if the short sale you mentioned includes your income or his income only.

2 - Rent it out and subsidize the renters to the tune of $12k a year in order to preserve your husband's credit rating. Why would you need a rental agency to help? Many people rent without going thru an agency, just like many people buy/sell without realtors. The sky doesn't fall if this occurs.

3- It's not your credit rating, so you'll be able to rent a place or buy another place in the future if you work. So many people are defaulting on their loans/cc's that I doubt a foreclosure would ruin you as badly as you think.

4 - Security clearances are a problem... the financial thing.

5 - your last statement "we have been waiting for the market to recover..." will probably result in a long, long, long, long, long (ad nauseum) wait.

So, IMHO you're screwed... made a poor choice to buy a condo in '06. Oops.

Thanks Tenouncetrout. I agree that the hoa fee is rediculous, everything about the place and the fees to own and live in the sillicon valley and most of CA are rediculous! Unfortunately the people that attend the hoa meetings are crazy!!! People come and want more cars towed, even though their is no shortage of parking spaces. I'm not sure how we could even go about that.

Last year we did qualify for a federal program that allowed us to refi even though we were underwater. It did help us lower payments a little bit, we got the first down to 4.7% fixed for 30 years, however it did not help us lower the overall mortgage down to what the property was worth.

Tenouncetrout says

I think you need to work on the taxes and HOA fees.
HOA fees have no business being over $75 if the building is anything like the millions of those buildings strewn all over South Florida. Sunrise lakes, Halendale, Hollywood, Hollybrook…
I’d try to talk to all of the home owners and work on lowering your HOA fees and City taxes on the place. Get it appraised at something you feel comfortable paying taxes on. Like 120K or so.

T-oz:

You're nuts if you believe that one can change the HOA fees. They are set based upon the projected needs of the community, the amount of reserve legally required, and the amount of people paying in.

Get it appraised and lower the taxes? Possibly. But not probably. Cities are re-appraising properties and raising the tax rate to ensure the city/county/state doesn't lose out. They also have rules about when the taxes can be re-figured, etc. Before she tries to get it appraised she should check and see if there will be any benefit to do so.

Tenouncetrout says

and Get remortgaged at 4.5% or walk away.

They're upside down on the place, so they won't be able to get a loan unless they pay down the loan to where they're not upside down any longer.

Eating the loss through a short sale would be stupid since I think prices will go back to $300K this decade. Well, I think it's 40% possible.

Taking the $1000/mo hit with a renter might be the best bet.

I'm seeing that at a 4.7% 30 year the monthly outgo on a $300,000 loan is $2100/mo, and $400/mo is principal repayment so the actual carrying cost is around $1700/mo.

Losing $700/mo is a lot better than losing $100,000 in one go! Keeping this is as an income property might be your only choice if you can't let the bank take back the condo.

Interest rates very well might be dropped to 3% sooner rather than later. This would most likely save you since it would add $50,000 to your property value (in terms of "affordability").

Condohelp says

I’m not sure how we could even go about that.

You can't. Anyone who tells you otherwise is lying to you. And associations are oppressive; when you purchased you agreed to abide by the cc&r's and that's pretty much that.

Condohelp says

It did help us lower payments a little bit, we got the first down to 4.7% fixed for 30 years, however it did not help us lower the overall mortgage down to what the property was worth.

You're screwed. Sorry to be the bearer of bad news...

Hi Elliemae,

1)The short sale includes only his income.

2) If we decide to rent the reason for the rental agency would only be if we decided to move out of state since we think California as a state may be the worst place to live pretty soon.

3) I do work, but I earn a teachers sallary and I would never be able to qualify for a decent home with my income alone.

Thanks.

Hi Troy,

I do think that renting may be our only option at this point, I just hope that it won't be for years. I also worry that rents may fall, as they already have.

Thanks.

not to be rude but it seems like the reason you want to move is because prices are suddenly a lot cheaper now?

You bought at the wrong time. Best thing to do since you can afford you payment is stick it out until you can afford to sell.
walking away in that situation sounds like a very bad idea. You will probably be on the hook for the second mortgage even after you walk away. Any money you save by squatting is fair game for litigation.

yeah, now that you've refi'd, there's really no get-out-of-jail free card.

Getting locked into your situation is what kept me on the fence when I was FOB in San Jose in 2000. I was right, too, as prices fell 2000-2002, only to return with the lower interest rates and hinky lending of 2003-2005.

The comforting thing is that it's in EVERYONE'S best interest that your condo price goes up from here.

But as you mention the PTB can't move rents that much. San Jose is stoner capital USA so if the pot thing passes this November there's that hope that people will flood into California for the cheap pot.

Anybody remember KSJO?

toothfairy says

not to be rude but it seems like the reason you want to move is because prices are suddenly a lot cheaper now?

No need to be combative. S--t happens. The billion dollar REITs are walking away from their properties left and right, but a poor schmuck who gambled on buying instead of renting in 2006 is stuck with the six-figure loss? It's the bank's money that paid for the property, so it's the bank's problem.

Unfortunately they refi'd so they lost the purchase-money protection, unless state law is changed and they're grandfathered in (not very likely).

Fire the door man and people can get their own mail. What there's an elevator hall lights, and a pool. How much can it possibly cost a month split between 40 units?

$300 is excessive, get on the board, and make a rabble.

Reevaluate the properties needs vs, nice to have all of the amenities of luxury that the RE boom mentality made seem sensible. Does the lobby need fresh cut flowers every morning delivered?
Is the planned painting more to do with cosmetics or does it need painting.

I'd be making a bitch and a stink if I had a one br condo, and I was paying $.50 a square foot a month on. That's more than what Tile goes for a square foot, these day.

Troy says

The comforting thing is that it’s in EVERYONE’S best interest that your condo price goes up from here.

Do you have a Mouse in your pocket?

So like most Americans we have lost value on our property.

You cant lose what you never had.

Troy says

Anybody remember KSJO?

LOL! Yes... we certainly had more head shops back then over 7-11s.

Tenouncetrout says

Troy says

The comforting thing is that it’s in EVERYONE’S best interest that your condo price goes up from here.

Do you have a Mouse in your pocket?

fair enough . . . I'm of course renting with the popcorn and am hoping for a Japan style slow landing back to real affordability. But renters don't count for anything in this system, we're the losers.

Toothfairy,

We need to move so we can have space to grow as a family. If I owned a 3 bedroom I wouldn't be so worried. However if I did own a 3 bedroom I'm not sure how we would have ever afforded that in the first place. We tried to play it safe buy buying something small hoping to get out after a few years. We have a dog, no back yard and two people who want to have children living in $670 sq ft on the second floor.

As I mentioned we are not forclosing, even though I personally don't see anything wrong with it. Businesses do it all the time, and no one holds them responsible. The banks don't want to help, in a way they are getting their just desserts when owners do a strategic default.

Wow. A 670 sq ft Condo for $305K plus HOA fees. I still can't figure out these Bay Area prices. Back the bubble time frame, didn't anyone stop and say "these prices are crazy"?

Troy,

I don't think renters are the losers. I think they are smarter. Save up as much money as you can renting until homes prices actually meet income levels.

I'm not banking on marijuana to help us :).

jvolstad says

Wow. A 670 sq ft Condo for $305K plus HOA fees. I still can’t figure out these Bay Area prices. Back the bubble time frame, didn’t anyone stop and say “these prices are crazy”?

Yes! But how do you tell that to the person who just landed here from Boston, Chicago, or NYC ? Much larger condos were much lower back in the day..... way lower!!

jvolstad,

Hindsight is 20/20. We see it now. They are still crazy. I forsee them tanking. The schools in this area are terrible, and the properties are at least $600k for an old home with less than 2000 sq ft.

$600K and heading down!

The biggest problem is that it will cost you $100k to get out of the condo right now even if you walk away.

you should look into renting your condo. If you have to pay money towards it each month that will be tax deductible. Plus you can claim depreciation so if you can find someone to rent for about 1200-1400 per month that might be enough to cover most of your expenses.

Toothfairy,

I think your right that renting is probably our only option, and I hope we can write off some of the loss. It is doubtful we can rent for more than $1100 given rental comps. I'm also worried that rents may continue to take a dive. Places in our area when we bought for a similar place were renting for $1500.

Thanks for your advice.

You and your husband have to do what is best for you. I realize there are risks involved with walking away, but you have to weigh the good and the bad. Like someone pointed out, since you refinanced this mortgage, that changes things. It is no longer non-recourse. My suggestion is to contact a real estate attorney who can give you some solid advice if this is something you are thinking of doing.

You are still young and can rebuild your credit and buy a house down the road. Even if it takes years to buy a house, wait. Save your money and buy once you have a large down payment. By then, you will know how much house you will need. My friend waited many years before she bought her first house. She rented and saved and saved her money. And she made less than a teacher did. She had two children and was living in a cramped apartment with her father and husband who was ill. They made it work. When she finally bought a house, she was in her 40s and she put 30% down.

Best of luck to you.

Remember that 30k that you were going to use to sell the condo? maybe you could use that to pay down the mortgage. Try to find out what it would take so that the rent covers your expenses.

If you can keep this condo as a break even cashflow (doesn't cost you anything to keep it) it might end up turning out to be a good investment 10 years from now :)

Good luck.

Thomas, can you repost your graph it's hard to read the dates.

Kat, if it were my credit I would walk away, but it's my husbands and he won't. I can't make him even if it involves the two of us. He is mainly worried that he will never be able to buy a house even after 7 years, and that no companies will hire him and that he will never be able to apply for a security clearance.

Toothfairy, maybe slumping some more money in this will help. It took us a year to make that concession that we would even give up 30k.

Anyone know of a good re attorney?

Condohelp,
I'm sympathy with your situation. Since you refied, walking away may come back to haunt you down the road. Keep paying the losing house is painful but seems an option to consider. Since your hubby made a bad choice, and if your husband has a decent income, you may consider stay put for few more years, put extra into your monthly payment. The goal is to pay down the load asap. Raising a kid in 700sft condo is suck but you will adapt to it. That is the price you have to paid for making bad decision. You will be amazed how human adapt to the environment when thing changes. If you really plan to move, it does not hurt to work with the lender to come up with a short sale and agree to pay certain portion of the deficiency. Not sure lender will agree but does not hurt to try.
Very one last option is to file chapter 7 or 13 to get out of this mess. But your husband may need to prepare for about 5-7 years of rough time.
It may come down to the choice of saving your husband's credit with 100k and with this credit he can recoup the loss within 7 years or sooner. If not, why bother.
I do know people declare bankcruptcy and still live well after couple years and keep driving Benz under wife's or husbankd's name.

Just my 2 cents.

http://www.housingbubblebust.com/OFHEO/Major/NorCal.html

You're underwater losing $1000/mo means you're losing "value".
Your hubby took the loan back in 2006 thinking it's ok. That was a mistake and you guys are paying for it now. Sorry to hear that though.

But, nothing has been really changed at all. Your physical loss is zero. You're not paying a penny more or throwing ten hundred dollar bills into the drain hole. What changed is your emotional view on the mortage you already have and perception on your condo as market fluctuates. It is loss in value, which is the loss that is not yet physically realized. Real physical loss occurs when you sell the condo at decreased price.

You may not like this idea though, you knew you don't need additional room if you can phostpone your family starting plan. You're not pregnant, are you?

By speculating the fact that your hubby was able to pull off 300K loan under his name only, and both of you're currently employeed, it looks like you guys are financially capable of managing the situation even if you're underwater. You're not on the verge of bankrupty or anything. You're just worrying about deceased home value. In fact, I think you're starting to save your combined income for the future. So please set your desire aside for a while, and think hard. Don't let the hope slip away because of this conceptional loss not yet realized.

Condohelp says

no companies will hire him and that he will never be able to apply for a security clearance.

Bad situation. I hate to say this but your husband is right - if he applies for a security clearance, he will be asked about financial defaults, liens, evictions, repossessions, foreclosures, etc. How much walking away from the condo will potentially impact an approval? The Department of Defense does about 90% of all security clearances - perhaps one of you might know of someone to ask, and help make an informed decision on this? Does anyone know how a typical HR department would view walking away?

Condohelp says

He is mainly worried that he will never be able to buy a house even after 7 years,

Frankly, I wouldn't sweat that as much. You can rent a lovely home for significantly less than purchase/monthly payments/maintenance anyway. THAT difference can be put towards the college funds.

Coming at you from the world's most cramped city: keep the condo, keep paying down the mortgage you've got, and raise your first kid in it. It's not too small.

Over six hundred square feet isn't that cramped. Most of the units in my building are 38 m^2 or just over 400 square feet, and while most are either childless or retired couples, several contain couples raising one kid -- the family across from us has two teenagers!

What's unsafe about the second floor of your building? Is there an open balcony with no fence? Putting up some barriers or blocking it off somehow would be a lot cheaper than moving just so that you don't have to be on the second floor.

How high are your ceilings? Whenever I'm back in the US, I notice people not making use of the fact that their ceilings are often 10 feet tall. Get shelves that are that high instead of letting all that upper airspace sit unused!

If you rent the place out and then go rent a marginally-better place just for a few extra square feet, you're effectively paying $1000 per month just for those square feet. You're also gonig to have agent fees siphoning away your money. Just stay in the place and make do with it. Lots of people raise kids in smaller spaces.

Condohelp,

Given your parameters I would rent the condo.

First your 2,000 cash payment includes about 400 in principle repayment and does not include tax benefit, whatever that is.

Ditch the management company for the rental. Just use craigslist for rental. 1,000 – 1,200 condos are not hard to rent out and since it is not particular expensive nor volume, the cost as a % will not be cheap.

Ask/demand the county for a property tax reassessment now, there is no way you should be paying your 2006 basis, you will win, the question is how much you can get. The county has to follow certain assessment parameters.

In your case, passive income above the line deduction may be more valuable than a mortgage interest itemized deduction. This is because your HOA fee, expenses, management fees and depreciation are all deductable. Say if your interest, tax, HOA and depreciation, and expense is 2,400 a month and rent is 1,200, you have about a 1,200 a month loss. If your tax bracket is 33% fed and state, that is 400 a month in current tax savings. You can turn a lot of post tax expense into pre-tax expense as well. Read about passive loss under IRS, the best value is if your AGI is around 120K (this is because you only need about 15K in loss, so the phaseout effect will start around 120K MAGI). The key here is that your 300K condo (not much land) basis is depreciable over 27.5 years or about 900 a month of non-cash loss.

Your actual cash outlay is really 2100 a month, less 400 toward principle and less 400 in tax savings = 1,300. If you can get rent that unit for 1200, you should be able to absorb the 100 cost. In fact, the property tax assessement should do it. It is much better than spending 100K to exit.

That’s what I would do. The second part is making more money to get the living situation you desire. If money is the obstacle, there are two fixes, cut costs or make money. make money is the more desirable route.

Condo,

Echoing the sentiment of others...sorry to hear about your situation. You may have read a very similar thread started by therapy--very similar situation. I'm sure you and your husband have discussed the practical side of your current living situation and the impact on your desire to have a family. Nevertheless, since it hasn't come up in the thread, I suggest you radically change your lifestyle expectations. Unless you and your husband find a way to start generating significantly more money, this condo (or the financial ramifications of foreclosure) will be with you for the indefinite future. You have to accept that. You and your husband's decisions have resulted in this situation. The positive is that you don't have a baby yet; so your "space" concerns are not realized yet.

You could simply hold off on having children. The flip side is that you could have a child and live in your condo. It can be done. You may not have ever imagined this kind of reality, but that shouldn't stop you. Families are raised in less than 675 sq ft all over the world. You can do it.

I like the renting idea; however, your comment about getting a service to do it for you at 10% is simply another bad decision in what no doubt has been an long line of bad decisions. I encourage you to change your perspective. You live in a 675 sq ft condo!! You can't afford to hire a property management service to rent out your condo. You have to handle being a landlord all on your own. Again, you can do it. Less time for email, web surfing, and posting on patrick.net, of course, but you have to do what is financially smart. Throwing away 10% of your rent on a property management service is stupid.

Go get'm Codo. We believe in you. Also, hook up with therapy. You two have a ton in common.

-Hooch

PS Check out Dave Ramsey. Also, go read the Millionaire Next Door. Great financial perspectives for these times.

Read about passive loss under IRS, the best value is if your AGI is around 120K.
I'll take your word on that! Just discovered the phaseouts are based on modified AGI. They make you add your IRA deductions back into AGI for modified AGI (no free lunch!). Nice post SF ace.
unlike most Americans we did not buy more than we could afford at the time
I know plenty of folks in $500k 2/1s that will be stuck there forever (raising their families). It appears we've reached the grind it out phase where the responsible ones now have to figure out what to do. Next stop, rental parity for condos.

TT says

Since the mortgage is in your husband’s name, I recommend you divorce this idiot and go find a smarter guy.

Right. Financial stability is definitely more important than being with someone you love.

It sounds like you need to figure out what your priorities are. IMO, you're placing too much emphasis on your credit score. The concern about not being able to buy another house in 7 years is BS. As much as it pisses me off (being a renter, saving, waiting for prices to come down), 7 years from now there are going to be so many people in the same boat that a foreclosure or bankruptcy won't prevent you from getting another home loan. The gov't can't afford *not* to give people who bought in the bubble a clean slate.

As for a security clearance: why? Is his future income potential really going to be limited by not having one? The reason foreclosures and bankruptcies hurt security clearances is the concern that a financially irresponsible individual would be more likely to sell classified information to dig themselves out of a financial hole. If you have a foreclosure on your record but a sizeable savings cushion and no other debt (credit card, etc.) he may still be okay.

Think about it this way: how much would you pay to buy a perfect credit score or a security clearance? If you wouldn't pay 50k for a perfect credit score, you shouldn't be willing to sink 50k into preventing your score from getting damaged.

Since you refi'd and your loans are probably recourse loans, this may all be moot. Stopping payments and walking away doesn't work so well if the bank can come after you for the remainder.

seaside says

You’re underwater losing $1000/mo means you’re losing “value”.

Your hubby took the loan back in 2006 thinking it’s ok. That was a mistake and you guys are paying for it now. Sorry to hear that though.
But, nothing has been really changed at all. Your physical loss is zero. You’re not paying a penny more or throwing ten hundred dollar bills into the drain hole. What changed is your emotional view on the mortage you already have and perception on your condo as market fluctuates. It is loss in value, which is the loss that is not yet physically realized. Real physical loss occurs when you sell the condo at decreased price.
You may not like this idea though, you knew you don’t need additional room if you can phostpone your family starting plan. You’re not pregnant, are you?
By speculating the fact that your hubby was able to pull off 300K loan under his name only, and both of you’re currently employeed, it looks like you guys are financially capable of managing the situation even if you’re underwater. You’re not on the verge of bankrupty or anything. You’re just worrying about deceased home value. In fact, I think you’re starting to save your combined income for the future. So please set your desire aside for a while, and think hard. Don’t let the hope slip away because of this conceptional loss not yet realized.

Great post Seaside.

You've got more options than you think. I can think of 3 right now.

1.) How about just trading your husband? It looks like that could save you a ton of dough.

2.)Could you afford to buy another house with a loss of $1000/month on your rental? If you could I would buy another house then just walk away from the rental.

3.)You could just walk away and rent. Save your money for a downpayment and then find an owner who will hold paper for 5%, or wait 5 years and then buy. A retired person (my parents exactly) would love to get 5% tax free on a private mortgage to someone.

Knewbetter,
I'm not leaving my husband!

knewbetter says

1.) How about just trading your husband? It looks like that could save you a ton of dough.

Condohelp says

Knewbetter,
I’m not leaving my husband!

He said "trade," not "leave..." Sometimes you get a newer model with all the bells & whistles...

:)