patrick.net

The problem isn't your situation, its your mentality that put you there, and will continue to do so, as long as the picture you get is what lies under your feet.

Unless you've got a Condo on Marco Island or the Waterways in Aventrua Florida where you keep running into O.J. doing Coke shots on a strippers breast in the Elevator.

Condos are useless crap-holes, that require you spend every last dime you own on Assessments, HOA fees, and pay for things you didn't want, and can't have what you do. Who in the hell wants 275K worth of that abuse?

The contract the citizens has with this Country is broken, and will continue be so, as long as 80% of Americans are priced out the essence of being what an American is all about.
Buying a piece of the American dream.

For those that wish to hang on to the value, are dooming the Country to more economic hardship. This country runs on Hammers and saws, and every thing it takes in the middle to keep them provisioned. When the hammers stop stocks and people's investments get Hammered.

Can't have both, you can either give back the one in your hand or speak up and have the whole thing fall out from the clutch of your jaws.

Uh, okay. Thanks for the insane rant that's completely useless.

I've already got the condo. I already made the mistake. I was asking for advice on the best course of action for where I am now.

Write your congress critter, stop paying demand a pay down, go in foreclosure repeat write your congress critter, the eleventh hour before the court date, the FDIC will send a seize and desist order on the foreclosure and you can just stay there for free for indefinitely.

Hey it's working for my Land lady that makes 32K a year in a house she paid 650K trying to get a cram down for 250K.

"Renting it out is not an option as the loan I currently have requires owner occupancy for the first 5 years."

the banks just wants the loan paid and could care less if it is owner occupied subsequently. You better double check that. Then you should explore renting and see what is the cash flow hit on you. It may be a viable option.

Congrats on the wedding and baby. Having said that, a baby doesn't take that much space initially as a baby room is pretty much a complete waste/luxory. You may want to think about that before making a haste move.

Again, not sure that's the actual best course of action.

I don't want to stay in the place. I want to sell it and move on.

And I'd like to do it as responsibly as possible, without absolving my responsibilities.

EDIT:
SF Ace - the loan I got was based on down payment assistance from the City of San Jose for $30,000. This $30k is 0 payments until the property is either sold or the 30 years is up, at which time it is due in full. Because of this "sweet" deal I got from the city of san jose on a new and upcoming development in an area of the city they're trying to gentrify, I had some stipulations to which I must abide. One of which is that it must be owner occupied for 5 years or I pay the loan in full. ($30k)

@therapy

- is walking away an option for you?
- price it even lower and get a bidding war started?

Here is my personal take :
Every time I drove by SJ downtown and the 'Axis' condos, I'd think 'man, I'd want one'. But recently the trend I have observed is, in a condo, you are at the mercy of the 'least common denominator'.

If some body stops paying the HOA, then you are screwed. Either you pony up to plug the hole or go through the lenghty legal battle to foreclose / lien the condo.

If some body stops paying the mortgage altogether then you are hit with foreclosure. It can sit there for months, while the bank certainly isn't going to pony up the HOA.

HEaring these news stories, severely diminished my desire to own a condo. And believe me, I am more of a hands-off, no-yard-work kind of a guy.

Sorry to hear your situation, hope it all works out for you.

the problem is there are 3 similar 1 bedroom left in your complex, that pretty much is going to undermine your selling effort. You'll have to compete on price alone and you're going to lose that.

how much do you owe on your mortgage?

SF ace says

Congrats on the wedding and baby. Having said that, a baby doesn’t take that much space initially as a baby room is pretty much a complete waste/luxory. You may want to think about that before making a haste move.

I will second this. We have a baby that is a couple of months old. He is going to sleep with you in the same room, in a crib anyway.
But if you are planning on having some body over at your place (like family help) after the birth, then one-bedroom is a drag.

I'm about $20k underwater - which, luckily, I can swing right now thank God.

I don't think I'd ever like to live in a Condo again. My HOA fees are very high ($330) and I have no pool, no gym, no weight room, no common hall. The best we have is a bocce ball court and some awkwardly sized benches (too big for one person, too small for two)

I would rather not walk away, as I'd like to have the option to buy again in the near future if the market looks right.

I can't afford to price it that much lower, maybe another $10k or so. I'm still $20k below the brand new ones, and unlike the new ones, my unit is on the "view" side of the building and does not look directly into other condominiums (or allow any others to look into it).

So while it's not brand new, it's still 2 years old, includes a parking spot, and a view - not that it's a fantastic deal but I'm guessing none of these units are flying off the market right now.

Here's what I would do, If I can't get the exit price you mentioned, I would either stay in the condo for awhile or rent the place out.

There is an urge to do all that baby planning before the baby is even out. Once you're occupied with the day to day needs of the baby, you'll have more clarity of what you really need and don't need.

Yeah, I guess it's just a sanity check.

My bottom limit on pricing is $265k. If I can't get an offer for that in the next 6-7 months, I'll take it off the market and worry about the day-to-day stuff for the baby.

Priorities, you know.

If I can sell it, then I'll probably rent a house for a while unless I find a house to buy that doesn't make me cringe. Bay Area prices really do make you feel kind of ill. $600 for a 50 year old, 1500 square foot home in an average neighborhood, and it doesn't even have a big lot.

therapy says

$600 for a 50 year old, 1500 square foot home in an average neighborhood, and it doesn’t even have a big lot.

Give it time, they'll be coming down.

Good luck with whatever the outcome, and grats on the baby.

the problem is with 265K, you'll end up less than that after escrow and all the transaction fees that the buyer will demand you'll pick up, so you'll have to layer in that as well, then the bank will want to be made whole which may require you to bring a 50K check for a clean exit.

I mean, you'll need to explore all your options including renting. If your interest is sub 5%, your cash flow hit should not be too bad. If your AGI is around 100K, there is passive loss tax writeoff that can help your cash flow as well.

My best guess is 125 Patterson St.. I'll second what some folks say about having a baby and go one further; that half bath might not be a bad baby's room for awhile.
You may want to check to see what commission the developer is offering to buyer's agents; if they're offering 4%, that could explain why no one is coming to see your unit. Hat tip to FAB if this is the case...

20K is a lot of college money for an unborn child. If prices rebound and you can cover your position, s/he'll have a nice head start for college. If prices go down more and you can walk away, s/he'll have a nice heard start for college.If you realize that 20K loss right now, you have guaranteed that it won't be allowed to grow in a college fund.BTW I agree with the others about needing more space immediately after a newborn arrives: it is not needed.

I'd just stop paying the mortgage, put it in the bank instead, and wait to get evicted. Your lenders get the property back, you get out of your loans. No need to lose money on this. Big corporations let properties go back to the bank, so can you.

Getting another apartment in the area might be difficult, might not, dunno. Having tens of thousands of dollars in the bank helps tho.

FORECLOSURE
FA borrower whose previous principal residence or other real property was foreclosed or has given a deed-in-lieu of foreclosure within the previous three years is generally not eligible for a new FHA-insured mortgage

The HOA fee on that is insane. At 3.88% rates it's like adding another $100,000 in cost to the property.

OK... I haven't read the other advice above, so forgive me if I repeat what was already said.

Lets look at the options
1) Sell now at a loss
2) Keep it and be tight on space
3) Let it go completly
4) Rent it out

1) lets say you sell.... will you be able to find a 2 bdrm rental for less per month? How soon can you find one? What about the impact on your credit (if any) will that impact your ability to find a rental unit? All questions you should ask youself.
2) How much space do you have? You have arledy been living there two years... depending on how far along your wife is, it may be close to three years by the time the baby is born. That only means you are more than halfway there.
3) Let it go completly - not the best option, but an option nonetheless.
4) There's the "wrong" way to do it. Rent it out and don't tell anyone. Or the right way - call the office that adminstered the program, explain the situation - perhpas they would be willing to work with you.

IMHO 2 is best, but I don't know your full situation, nor the size of the condo.

1) Yes, a 2 bedroom rental is about $500/month less than what I pay now with HOA/property tax/etc, but obviously I'd have to change my tax writeoffs a bit so the savings won't be the full $500, probably closer to $200.

2) 800 square feet roughly, but there's a huge bathroom (which is nice, but kind of useless for my current situation) 1 bed, 1 bath. We can fit a crib in the bedroom, but once the kid gets to be about 12-18 months it'll be a bit tight. I can make it work for a year, but I'd rather not if I don't have to.

3) Not going to do it. I know you can walk away and buy a house in 7 years or something - but I'm not about to do that. I know it may be costing me money, but I guess I was always raised in the whole "if you gave your word, you stick by it" tradition. I told the bank I'd pay, and I will. It's my mistake, I'm not going to pass that cost onto a bank that had faith in me enough to give me the loan, even if everyone else is doing it.

4) I might be able to rent it out to my brother. He's about to graduate college, and as long as I still "own" it and rent it to him at a reasonable rate, it's better than taking the wash.

Thanks for the advice, guys.

You must get you rest to continue work and the baby care in yor free time. Four good nights of sleep a week. That half bath is your new second bedroom. Build a pattern for all three of you and soon you'll be able to give the wife some time in the "other" bed
room while you watch the baby.

Don't walk off. Pay your bills. Be happy.

ptiemann says

List it for 199k.

If it’s worth more you will get higher offers.

Nobody can force you to accept any offer. The market will tell you what you can sell for.

That's why I ALWAYS offer 10K less than they are listing them for. The people really interested in selling will at least counter my offer, and not cop out with... "Well... I bought it for...."
And if they have someone else they are considering, then by all means close your deal with them. I know how hard it is to find a decent house I want enough to make an offer on.
So if they are starting that crap before I've even got the first words of questioning them, out of my mouth. MY next words are, well good luck, I hope the five of you work something out.

Your mistake can be your child's opportunity. 20K seed money for college at birth, conservatively invested, is quite a "gift"

therapy says

4) I might be able to rent it out to my brother. He’s about to graduate college, and as long as I still “own” it and rent it to him at a reasonable rate, it’s better than taking the wash.
Thanks for the advice, guys.

As Eastcoastbubbleboy said, there's right way and wrong way. You'd better figure out what can be done with your 5 year occupancy rule you got from the government loan. "Owning" and "occupancy" sometimes is not the same, and the confusion b/w two can cost you dearly in the future if something goes wrong. So be careful with this option.

Tenouncetrout says

That’s why I ALWAYS offer 10K less than they are listing them for.

An offer 10K less than listing price could be an acceptable offer or a lowballing depends on the market situation. With 500K home or even 200K home, most sellers will consider it without too much hesitation, but with 100K home... you're gonna need some luck.

therapy says

Again, not sure that’s the actual best course of action.
I don’t want to stay in the place. I want to sell it and move on.
And I’d like to do it as responsibly as possible, without absolving my responsibilities.
EDIT:

SF Ace - the loan I got was based on down payment assistance from the City of San Jose for $30,000. This $30k is 0 payments until the property is either sold or the 30 years is up, at which time it is due in full. Because of this “sweet” deal I got from the city of san jose on a new and upcoming development in an area of the city they’re trying to gentrify, I had some stipulations to which I must abide. One of which is that it must be owner occupied for 5 years or I pay the loan in full. ($30k)

ok, so now you're at least 20K underwater on the loan, owe 30K upon selling to San Jose and probably owe 6% selling fee and a few thousand in transaction tax, and likely get squeezed by the buyer in this market, you're just not going to be able to get out of this cleanly now. You'll have to bring at least 80K-100K (depending on selling price) check to do it the responsible way. That option looks dead to me and i'm surprise your selling agent is even attempting this. If nothing else, your lender will not agree unless you can pay the difference, whatever small amount left after escrow and everyone takes a bite. You should also review carefully the terms of the San Jose agreement carefully as well and find out what happens to people that can't pay it back.

If that doesn't sound good, acquire a desire to earn money and you'll keep the condo as a rental and get the bigger house you want.

I think staying is the only viable decision now. One bedroom is not that small for a family with a newborn.

My best advice would be to lower your price, whatever it takes, and sell it ASAP. The longer you wait, the more you will loose. Prices are going down, much lower. If you think selling is hard now, just wait until a year from now. You'll think these were the easy times.

There was a report last week that loads of people in CA are trying to sell right now and can't. That is what's holding them in CA. They want to sell and get out of the state. If they can sell, CA will see a major drop in its economy. It's a loose loose situation. Not good. CA is in for a heap of trouble for years to come, decades, even if it can avoid defaulting on it's bonds.

Last week Arnold gave the order to cut 200,000 CA state employees wages to minimum wage. Treasurer Chiang is resisting, but it matters little, the train wreck is dead ahead. The bottom line is: people will have less money in the years ahead, and home prices will go down.

Now consider what happens when interest rates go up. Home prices get killed again. Now consider the babyboom demographics: in 10 years there will be 3 houses for sale for every 1 buyer. That's the math, and it cannot be changed. Home prices get killed again.

There are 51 million active mortgages in the US. Right now there are 19 million vacant homes, and 7 million in various foreclosures. That's 26 million distressed properties. That's 1/2 the size of the ENTIRE home market! Home construction is over for the next 20 years. What lies ahead is a sea of homes for sale. Prices will never be as high again in our lifetime.

"“if you gave your word, you stick by it”

The house is collateral. So if you don't pay the bank gets the house back. The bank is taking a risk as well. A lot of people have made bad bets (the government, banks, consumers) but some on this board are advocating that we should protect the oh so holy banks while the consumer gets screwed. I'd walk away in a heart beat. IF the government is dumb enough to allow me to put down 3.5% and I'm paying PMI I feel I can walk away in good conscious. If my credit is ruined in the process and I lose the house so be it. That's the risk I take being a home owner. As a tax payer I'm paying over 50% taxes to our overbloated government (who supports bank bailouts, fannie/freddie, needless wars, etc, etc). I don't feel the least bit guilty if I had to walk. Your tax dollars bailed out the banks, supported Fannie, Freddie, FDIC, etc. So you are willing to donate half of your pay check for these programs that support the banks and every other free loaders bad decisions but if you make a bad decision you still pay your taxes but let youself get screwed by going broke.

@ b8c0d50b

"There are 51 million active mortgages in the US. Right now there are 19 million vacant homes, and 7 million in various foreclosures. That’s 26 million distressed properties. That’s 1/2 the size of the ENTIRE home market! Home construction is over for the next 20 years. What lies ahead is a sea of homes for sale. Prices will never be as high again in our lifetime."

Those numbers are frightening. Can you quote a source?

Walking away sounds like the best answer. You will have 7 years of renting, possibly less, you are living in a condo right now so what really is the difference with an apartment? I can tell you from personal experience your baby will not care. Those that feel there is some moral obligation to pay are only really worried about their own house prices. Walk aways will increase the speed at which we will return to a true value for housing.

Your ethics are admirable,but they are resting on the assumption that the bank had "faith" in you to pay it back.

No, the bank had faith that they could get paid twice for the same loan, once on the origination and then selling the note to Wall Street.

You don't really "own" the condo, anyway. Effectively, you are renting from the bank at twice the price of renting from a landlord. If you stop paying, the bank gets their condo back. That's the deal. No need to feel guilty.

So you're renting money to live where you don't want to be. Doesn't make sense for your family.

As for San Jose, the city was stupidly giving money to developers through this get-citizens-into-debt scheme. Stupid gets as stupid does.

Stop renting the money. Get a lawyer and consider walking away.

I am with most everyone.. look at your mortgage, have an attorney review to see if you could be subject to collections action against the deficiency (and can the City of San Jose chase you as they may be a guarantor) ... and also have the attorney look at your HOA agreement... you may be there for 12 to 18 months paying nothing awaiting foreclosure and eviction... can the Condo Assn come after you (and they could have far more assertive collections actions coming at you for years). And walk away.

Since your credit will be creamed... if you need a new car, buy one now.

And as far as not being able to buy for 7 years... you will not lose any sleep as you watch prices continue to spiral down another 10 to as much as 50% in the Bay Area... so in 7 years as prices recover some you will be paying less for a home than you would now anyhow.

One general comment... condos nationally are tanking in value twice as fast as single family homes... one of the issues is that condo fees are far above what's reasonable... and another is that condos that looked like luxury in-town living a few years ago are perceived now as just basic apartments and nothing more... apartments with often restrictive rules and landlords that skip town leaving the surprised tenants with lost deposits, lost parking spaces and a sudden eviction.

Congratulations on your marriage and your new baby. We have a two-year-old that stays in her crib and can also sleep in a pack-and-play. Most kids will stay in their crib long after they are physically capable of getting themselves out, sometimes three years. The pack and play is used for as an alternate place to sleep, and can be assembled/disassembled in 30 seconds.

I personally would rather be cramped than stressed about money going into marriage, but you would all three have to be efficient sleepers to get along in one room. The baby might take a while to sleep through the night, especially if he/she is nursed back to sleep each time. Until then, you will both be sleep-deprived and cramped, regardless of the size of your condo.

I, too, own but want to upgrade to bigger house for my growing family. I look at the decline in real estate as a plus: whatever percentage my house drops in value reflects a roughly equal percentage in value of the larger future house, which will save me money.

--David from Savannah

It seems like there are people on here who have wildly divergent ideas.
- Some are 100% convinced that the mortgage rates should go up, and drive down home prices down to 50% of their values in the Bay Area.
- Some think we’ve hit the bottom and that both mortgage rates and home prices will go back up over the next year or two to 80-90% of their peak values in 2006/2007.

Regardless where rates go, prices will continue to fall. Never in the history of the region have prices skyrocketed 300-400%. We are way overvalued on RE prices.

No! not the bottom yet. Take where prices of homes were in mid 90s and compare what has happened over the past 10 years... whats changed to justify even 1998-2000 prices ?

We saw the tech bubble in 2000, and pretty much many understand that one, but not many want to bite on the 10 year long RE bubble in the Bay Area.
see chart...
http://www.housingbubblebust.com/OFHEO/Major/NorCal.html

BTW, congrats on you little one..

If you want to be patient, stop paying your mortgage and wait until you're forced out. Save the payment, take the hit and walk away. Rent a modest place that you actually want to live in. Housing prices, employment and home ownership will continue to decline for the next three to five years, and with a huge supply of empty houses, renters with jobs will have more options than hopeful buyers, despite their credit ratings. Credit is meaningless without a good job and 20% down. When homelessness becomes widespread, the bottom is in.

My real estate agent claims he’s bewildered and “has never seen anything like this” which is not comforting in the least.

LOL! welcome to what it feels like when you have a normal market as we did back inthe early 90s. Condos do get hit the hardest. Last weekend I drove past more than a few homes for Sale in Cupertino. Plenty of RE for sale with reduced priced on the market.

newhomebuyer7 says

“There are 51 million active mortgages in the US. Right now there are 19 million vacant homes, and 7 million in various foreclosures. That’s 26 million distressed properties. That’s 1/2 the size of the ENTIRE home market! Home construction is over for the next 20 years. What lies ahead is a sea of homes for sale. Prices will never be as high again in our lifetime.”

Yes. The same could be said regarding the Tech bubble back in 2000. Never to be seen again. How many are ticked that Yahoo stock isnt $350/share any longer ? Was that even close to "normal"?

Congratulations on the marriage and baby!

If you have your original mortage, and you walk, your liability is the condo only. If you refinance (or have refinanced), then the bank could come after you for the gap between the mortgage and the value. So if you have not refinanced already, I'd suggest not doing it now, just in case. I admire your desire to do the right thing.. but it may not be the right thing for your family. And if you have some financial trouble you may have no choice.

Probably cannot refi now anyhow due to decline in value, but even if you could I'd suggest that you not do it.

Good luck with everything. After the baby comes you will probably not worry about it so much, you'll have other things to occupy your mind. And the time savings of not having to take of a yard and such will be nice. You'll have a few more years before schools become an issue.

IMHO study history and you will see housing is NOT going back to anything of the past. That kind of thinking is pure fantasy island. There is in my view going to be a 50 per cent drop from where we are now ...that is my prediction because various factors now prove what they are saying to be true. Using statistical methods tells me in my research that is the only way things can go for American real estate since it has been unrealistic and detached from honest value since the late 70s. Value was not part of the equation against any reliable factors during the past ten years, and California (where I came of age) I believe is the worst of it all. On a responsibility front I personally would never walk from a loan, mortgage or financial responsibility. It is a character flaw as my theory is if a man bites the bullet and signs for a loan then you see your obligation though. There is no free ride and there shouldn't be either. I foresee tight enforcements coming against people who walk too as there should be, because people who walk or no longer like their deal and don't want to pay effects those of us who DO pay our bills (even for items we have had remorse for purchasing.) It is a sad reality but a valid one, being a man mean standing tall and DEALING with things both good and bad, not crying or running like a little girl.

commonsense says

There is in my view going to be a 50 per cent drop from where we are now …that is my prediction because various factors now prove what they are saying to be true. Using statistical methods tells me in my research that is the only way things can go for American real estate since it has been unrealistic and detached from honest value since the late 70s.

Could you elaborate on your statistical methods that predict a 50% drop nationwide for housing prices? Some data?

commonsense says

Value was not part of the equation against any reliable factors during the past ten years, and California (where I came of age) I believe is the worst of it all.

Spot on! Much of exhuberance, in the BA centered over the short years between 1998-2000. Many still beleive we will have a repeat of the tech bubble. It may take until 2015, but what happened back 10 years ago will fall into urban legends. It will be a slow decline from here on out as 2000 fades away from peoples memory.

therapy...oh man, you are in a tough spot. Of course, it was your own doing so, whatever you do, take your lumps like a man. Own up to your own greed, stupidity, entitlement, etc., etc....whatever it is that took you down this road. Also, be sure that, unless you can find a way to start bringing in a lot more income, this misstep probably will follow you financially for many years to come. That, for sure, is the huge bummer. Again, you brought it on yourself. Take responsibility for your decision.

While I understand those posters who advocate for walking away, I don't recommend that. Your ability to obtain a loan of any kind will be destroyed for the next several years, perhaps longer. Also, we don't know how the law regarding bankruptcy or lending will change in the years to come. Walking away could be financial suicide. Beyond obtaining loans, you many lose your ability to maintain or get credit cards, accounts with any kind of financial institution. Frankly, you will have trouble renting with a terrible credit rating. Just some things to keep in mind.

Instead of walking away, I would attempt to minimize your pain by renting out the unit. Yes, you say there is some kind of provision limiting your ability to rent. First, you need to clarify what that limitation is, if it even exists. Second, you need to contact who ever put that limitation in place. If it was the City of San Jose, you might want to contact your city counsel member to see what can be done. Others to speak with might be the developer...even the lender on your FHA loan. Who knows what the possibilities are. The reality is that you have some serious work ahead of you. Get to it.

-Hooch