Should I take this loss on my house?

In My Humble Opinion
1

I’m in a quandary over my house.

We bought the house three years ago for $130K. We finanaced 100% of it, so we only have about $4500 in equity in it. We’re moving this summer, and my calculation is that after we pay the realtor, we’d have to get $134K for the house to break even in the closing.

Unfortunately, the housing boom that has taken America by storm has hit everywhere but my neighborhood; we listed it at $136K, which our realtor thought was an absolute maximum that we could reasonably ask for it. It’s been on the market for about 6 weeks, and we’ve had maybe ten showings. We’ve had plenty of people express interest, but no one made an offer until last week, when someone offered $126,000.

We countered at $134K, and they came up to $130K. The problem now is that our realtor seems to think this is the maximum these folks can get through their lender. I think I’d be happy at $132K–a $2000 loss–but they might have to pass on it. I told our realtor that I didn’t feel like we had to take the first offer that came along, but she was quick to caution that another offer may not come along.

I really, really don’t want to take a $4000 loss here. Then again, if we don’t get another offer in the next few months, we’ll end up paying both mortgages for long enough that we’re even worse off. I also just absolutely hate the idea that I bought the one house in America that has appreciated exactly 0% in the last three years.

If anyone with more experience or a wiser head for real estate than I had any thoughts, I’d appreciate it.

2

One thing to remember is that you have to live somewhere. Think of it like a rental. You spent under $120/month to live in a house.

3

I’m talking about a $4000 loss in the closing itself, as in I’ll have to come up with a $4000 check at the closing.

4

Have you considered renting the house out until it starts to pay off a little?

That’s not what my first choice was but we ended up in the same situation around 7 years ago. Now the house puts out a little profit each month plus has exceeded in value in relation to what we owe on it.
Good luck either way. I don’t blame you for not wanting to take such a big loss.

5

I thought about it, but the problem is that we’ll be two states away, so we’d have to pay someone to manage it for us. Also, if the house hasn’t appreciated any in the last three years, I don’t really have any reason to think it will in the foreseeable future.

6

I’ve been in this situation. I took the loss. It was worth it for the piece of mind knowing that I had a buyer’s signature on the contract of sale.

7

…**peace ** of mind… :smack:

8

That really sucks, especially since real estate has been booming out our way (SE). I’d offer to help, but I doubt there is anything I could do - just offer my apologies I suppose. If I was any older I’d offer to help manage it for you, pro bono of course, but I’m far too young.

Unless a lease-purchase option could be agreed on, I’d say bite the bullet and assume that value into your next housing purchase. Sucks, but not much else can be done - that’s almost way to large of a gamble to pass on.

9

Only if he had one of those “you don’t have to pay the interest” mortgages. :wink:

My only suggestion was going to be trying a FSBO to avoid having to pay the agent’s comission, but you’re already signed up with one (and it would have been a headache anyway).

I’d just take the loss. You need to live in a place a lot longer then 3 years to break even financially (compared to renting).

But hey, the advantages of having your own house for those 3 years were probably worth the money, right?

10

As for the distance, I see what you mean.

Our entire neighborhood became pretty unstable for quite a while after we left yet the value continues to grow higher and higher. The only rational excuse I can think of is that perhaps this neighborhood is piggy-backing off of better more expensive ones of better value.

That said, there’s nothing like a clean cut. Who wants to tend to a property two states away that they resent?

11

Take the oiffer. You’ve got 6 weeks of concrete evidence that the price you’d like is too high.

As to your comment about zero appreciation, remember that roundtripping a house, ie buying & later selling it, has about 8% of additional commisssions, fees, and taxes attached. So until it appreciates 8%, you’re out some money. The rule of thumb is it takes about 3 years of appreciation to cover all that and THEN you begin to see real cash-into-pocket appreciation.

12

I know. But I was trying to put a good spin on it.

I must be a politician at heart.

13

Take the loss. I’d guess your mortgage is close to $2000 a month. An overpriced house can sit for months. If it sits another two you’ll be out as much money as you are today, and have had two months of stress.

I’m assuming that your house is clean and in sellable shape and “staged” for selling (that can make a difference).

My sister took six months to sell her overpriced house (too big a house for the neighborhood, built custom and there was still a lot of land around for people who wanted big houses to build their own). She ended up buying the home of the people who wanted to buy her home - trading a 350,000 mortgage for a 150,000 mortgage and then selling that the next Spring. (She owned another home in North Dakota). My parents next door neighbor has been selling his home for six months.

14

Take the loss. In addition to other reasons already mentioned, it seems to me that the longer the house is unsold the more likely it is that any offers you get for it will be lower than the offer you have now. (Not a homeowner, but I read advice columns on real estate and it seems like one common piece of advice is that if you are looking for a bargain you should look for houses that have been on the market awhile).

Also, while I’m sure you feel like you have the only house that hasn’t increased in value- the reality probably is that during the recent real estate boom many houses have in fact done what your house has, and some have lost much more value, its just that the houses that increased in value rapidly are the ones that make the news.

15

You are missing one of the benefits of renting the house–the rentors pay off your mortgage. If you rent it long enough, the mortage will be paid off and you’ll have the full equity value of the house. You don’t need the house to appreciate to make money off of a rental property.

16

I agree, take the loss. It’s only $2K less than what you’re willing to accept. In my opinion that’s small potatoes compared with the possibility of not selling your house in time for the move, and all the ramifications that’s going to have.

If you had just put your house on the market I might suggesting waiting, but it’s been 6 weeks, so you have some evidence supporting the idea of selling at that price.

17

Take the loss. You could end up having the house on the market for another six months and not see another offer this high.

18

Instead of selling it at a loss, is it possible to sell it (with the consent of your mortgage company) to someone who’ll give a down payment enough to cover your closing costs, and will then assume your mortgage? You wouldn’t make money, but at least you wouldn’t pay to close.

19

(Disclaimer: I am not a realtor, not legal advice, blah blah blah…all that good stuff)

You’re going to have to come up with more than the $4,000 you’re counting on at closing. Don’t forget, there are closing costs (such as owner’s title insurance, which is usually paid for by the seller…and possibly doc stamps/taxes which can get pretty steep depending on your state, etc. etc.).

As far as the option of someone assuming your mortgage, that’s probably not likely as there almost no assumable mortgages executed anymore except for VA, FHA, or variable rate loans (if yours was not one of those, it’s almost certainly NOT assumable).

Besides, even if the loan was assumable, the new borrower still has to qualify, and the lender is not likely to grant permission unless they can charge a profitable rate for the mortgage (i.e. the rates are now sufficiently lower than the rate you have currently, thus making it more profitable to let someone take over your higher rate mortgage than to grant them a new one at a lower rate). That’s the short answer, but that’s the gist of it.

Also, 6 weeks doesn’t sound like very long at all to have your house on the market…what is the average length of time for a house to sell in your area? Have you looked into that?

Areas of the country vary, but the low end of average used to be about 12 weeks for most places before the first serious offer. The market has certainly not been “normal” for quite some time, and in most of the areas I am familiar with houses are generally taking longer to sell (had a conversation with a realtor friend of mine about that this very afternoon, in fact).

Wish I could give you a definitive answer, DoctorJ , but hopefully there’s some food for thought.

— Cherry2000, who closes 20-30 transactions a month

20

Some additional points, some already made, drawn out another way.

HANG IN

The last thing I want to do is freak you out at this point - but I don’t like this realtor’s push to sell. Remember that she is going to make circa the same commission whether she sells today or after July 4th and the latter date implies more work for her. She has an incentive to get you to sell now. IF her advice was that 136K was the maximum you could expect 6 weeks ago, you told her that you didn’t need to grab the 1st offer made, I do not understand the push to take this now. 6 weeks really isn’t very long.

$4000 On a 30 year 5.8% 136K mortgage vs. a 30 year 132K mortgage is a difference of circa $22 per month. It strikes me as very unlikely that someone who qualified for a 132K mortgage does not qualify for 136K (it is possible – just not extremely likely)

TAKE IT

OTOH it sounds like her advice on the price has been pretty competent (had you truly been under priced presumably one of the 10 previous showings – or their realtor or other savvy realtors/investors who saw the listing) would have snapped your place up in the past 6 weeks if for no other reason just to flip it. It is her job to know the market – on price it sounds like she is very close.

It is too small an amount if this hold up is in any way preventing you from buying into a more robust market, You could carry the $4,000 on your new home and the way the market has been booming your new home will probably appreciate more than $4000 by the end of Fall – Or the $4,000 you gain on the sale of the existing will be offset by delaying buying the new home for, say, $10,000 more.

I have no real advice it is your decision just some extra points - good luck!