Some Advice, Please? I Don't Have Anyone Else To Ask

In My Humble Opinion
1

I’ve got a longstanding situation on my hands that’s liable to blow me up financially if I don’t do something about it soon, but I’d like to have some imput as to whether or not I’m being rational about it…or if I’m letting my anxiety get the better of me.

I own my childhood home as my inheritance – I “bought” it from my mother for $1 back in 2006, the year before she went into a nursing home. She passed in 2007. The house itself had been free and clear in her name for the past, oh, 20 years when the mortgage was finally paid off, I think? I don’t remember the exact year, but memory tells me it was around that time period.

My mother was house poor. She couldn’t afford to upgrade/update things. There hasn’t been any major kind of work on the house since the late 1980s, where she had the roof redone. She had repair work done here and there, mostly the slap-something-on-it type (you should see the plumbing :eek:) Most of my dad’s estate and her earnings that she’d socked away when she worked was spent on the property tax. Before she became ill, I begged her to consider selling for fear she’d be rendered homeless because at some point she just wouldn’t have any cash reserves left. She refused.

I now find myself in a very similar situation. The difference is that I’m still working, but my monthly salary is simply not enough to pay the household bills plus the property tax plus the water bill plus who-knows-what-else. The house is beginning to fall apart, too. I know we’re going to need a new roof. The plumbing needs to be redone. I could take out a home equity loan, but I’m deathly afraid I won’t be able to pay it back.

My husband is one of the many long-term unemployed who hasn’t been able to get back on his feet, professionally speaking, since he was laid off a couple of years ago. He has a PT minimum-wage job that gets him out of the house and his own bills to pay. We have no joint accounts and his name is not on the deed for reasons I’m not willing to disclose publicly. He’ll give me extra $ when he’s able to put toward a bill, but that’s the extent of his contribution. If he were working FT at his old salary, it’d be a much different situation, trust me.

I’ve wanted to sell this house since Day One. I’ve been told that I’m crazy to want to, given that I don’t have to worry about a mortgage. Our property tax has risen nearly 12-15% in the past 3-4 years, equaling to the average mortgage or rent payment in this area. I have trouble making this payment every single time, no matter how much $ I sock away from my paycheck. Right now I owe back taxes from last year on top of what’s currently owed.

In short, I’m petrified beyond belief.

Some factors to consider in my situation:

I’m frugal to a fault. We have no frills, no excessive spending. We live in a very expensive area, however, and everybody who lives here complains about the same exact things I just did. However, they have well-paying jobs. Mine is well-paying for my industry, but it’s just barely above a living wage.

My husband moved back here from the Midwest before we married, and I know he’s loathe about moving in general, although he keeps talking about it. He doesn’t want me to take a loss on the house. At this point I know I would, and I don’t really care.

I have no qualms about renting IF I could afford to do so. And that’s the issue, really – we can’t afford to keep living here, but neither can we afford to move somewhere else in this area., and we both would rather stay here.

I can’t take a PT job because of my work schedule. My husband has a small side business that’s been dead in the water for awhile now, and he can’t see it improving anytime soon, given the current economy,

So…if you were in my shoes, what would you do?

2

A mortgage is only one of the expenses of home ownership. There are others like upkeep and property taxes. You sound like somebody who has a more expensive house than you can afford on your income.

Generally, the best thing to do is get out of the situation while you’re still ahead. Sell the house now while you own it rather than lose it for unpaid tax bills or see it lose its value for lack of maintenance. Use the money from the sale to move into a cheaper place you can afford to stay in.

3

If you owe two years of taxes and paid a dollar for it, I have a feeling you’re not going to take a loss if you sell it. Anything over the cost of two years worth of taxes and you should be above water, unless I’m misunderstanding something.
Even selling it below market value (which you may have to if it’s a fixer upper) isn’t going to matter since it’s all money in your pocket (less the taxes owed).

Also, to add on to what Little Nemo said. You didn’t give us any numbers, so to just make something up…Let’s say your house should be worth $250,000. If you can sell if for $150,000 in it’s current condition, pay all the taxes and move into a house for $140,000 you could just about buy it outright and now only owe taxes each year that are significantly lower on a house that has a newer roof, up to code plumbing etc and you could sell if you needed to since you 100% equity in.

Even in your situation, owning the house outright is going to be a huge advantage no matter what you decide to do. There are a lot of people that can’t afford their house but are so upside down they can’t afford to sell it either.

4

Does the house have more space then you need? You might take in boarders ? That might take investing in remodeling so part of the house has its own access.

5

My off the cuff reaction is that your husband needs a whopping dose of reality and a second PT job. What the heck is he doing with his time? is he pouring it into his dead-in-water business? If so, he needs to face facts.

My second reaction is that side job that offers the most flexibility and money-gained-for-hours-spent is tutoring. Got anything you or your husband could tutor? Writing? test-taking skills? Guitar/drawing/other hobby?

6

What about taking out a HELOC and then renting out your basement or something? If the area is that desirable, you shouldn’t have any trouble finding renters.

I know you want to stay where you are, but if you have no mortgage and you still can’t afford the taxes…well, I’d pack my bags if I were you.

7

You can’t afford to continue in your current situation.

I don’t understand the thing about the property tax being equivalent to a mortgage payment - so people with houses in your area are also paying property tax of equivalent value to their monthly mortgage payments?

How far away would you need to move to be able to purchase an affordable house using money from the sale?

8

I think she’s saying that a mortgage payment is very high in that part of town and that the tax portion is comparable to a rent payment in an apartment. Where my parents live, mortgages can be well over $3000 per month easily, taxes are about $10,000 a year. That’s about $830 a month for the taxes. It’s not a problem to find a nice apartment for $800-900 a month, especially if you look to other neighborhoods.

9

I think this is the case yes. I know in my area, when you buy an apartment you pay a “maintenance fee” to the building, which goes to both maintenance and capital improvements to the building. Very often this maintenance fee is the same as local rent or equal to a mortgage payment. So that renters tend to pay [rent], a paid off mortgage still needs to pay [rent] and a mortgage holder pays [rentx2]. It’s a little bit crazy.

10

Bingo – that’s exactly my point.

There are many homes in my area which are similar to mine in this regard – my immediate neighborhood is a sea of fixer-uppers, but it’s the gateway affordable neighborhood in my “much desired” (according to the media) town. Everybody who has sold in the past couple of years has sold to people who have the means to remodel and such. I can see somebody doing it to this house – it’s got great bones, but has been woefully neglected for awhile now.

11

I owe one back payment. I managed to pay the rest of them, but there were weeks just before/immediately after where we literally couldn’t buy groceries because I also paid all the bills (I refuse to let my credit go to hell over this, btw).

Recent comps in my area are in the $400-425K range. I’ve been told I’d be at the upper end because of my square footage, but I’d expect it to price it accordingly because of the work needed.

My initial thought has always been to sell, the buy outright at a much lower price in a more affordable (which is relatively speaking in my area) area.

And OMG, you should see the number of foreclosures in my town. It’s gotten so bad that our local paper did an article about it a few months ago :eek:

12

We’re not zoned for multi-family or an in-law unit. My next door neighbor tried doing that and was shot down by the zoning board.

We do have a closed-off bedroom and a den, both of which we use for storage. But yeah, this house was too big even when I lived here with my mother. It’s just my husband, me, and our dog.

13

So, just to toss out numbers…Could you put it on the market for $400,000, accept an offer for $350,000 and buy a new house for $275-$300,000? In a perfect world, that would leave you with a nice chunk of change for tax payments and whatever else you need for the next few years on the new house.
Again, you paid nothing for the house, so you’re not taking a loss.

If you get a free Corvette and sell it for $5000…it’s $5000 you didn’t have before, not a $40,000 loss since the car was worth $45,000 new (especially if the car needed repairs, was ten years old and had 200,000 miles on it).

14

:nodding: That’s exactly the scenario in my area. Mortgages aren’t quite that high in my immediate neighborhood, but they are on the other side of my town.

To find a decent apartment in the $800-900 range, I’d have to move across the border into the next state or move further out to the other end of the state. The problem with those scenarios are, of course, my job. Some of my coworkers have a 100 mile RT commute because they’ve been priced out of this area. That just blows my mind…

15

I think the first thing you should do is call a real estate agent, get the house appraised and see where you stand. It’ll be a lot easier to figure this out when you have some real numbers to work with rather then just guessing…assuming that’s the direction you want to go with this (or are are at least considering). If you don’t want to sell, obviously, don’t do that.

16

He’s trying to make a go of the dead-in-the-water business because he can’t afford to legally close it yet. He also has a couple of clients he’s loathe to let go because they’ve been with him since the beginning. Every so often he’ll have the opportunity to take on another client or two, and it ends up that they won’t/can’t pay him on time, which is how everything ended up being dead in the water the first time around.

Yes, I’ve given him the come-to-Jesus talk countless times. He still insists he can make a go of it, though. I’ve given him deadlines, we’ve discussed ad nauseum the what if’s and what for’s…he’s just very stubborn because he’s convinced things will turn around. As much I hate the trample on his dreams, I’m also the more realistic of the two of us, and he cannot seem to grasp that.

17

You’re reading my mind, aren’t you? :wink: I could easily afford a house closer to where I work in that price range in that scenario. I went as far as looking at Trulia and Zillow last summer and doing a few drive-bys, but I never actually took the plunge and contacted a RE agent…

18

Since you have no money to put into, your choices are to sell it as is, let back taxes and further degradation build up over time further reducing the value to you, or get a mortgage which will allow you to improve the property and increase its value. I’d follow Nemo’s advice, price it to sell and get out while you can. My observation is that occasionally people can hold on to a house they can’t afford and eventually over time the value will increase and they come out better off, but usually it seems to turn into a disaster where they hold on too long, and end up losing most of the value of the house, if not all of it.

19

If your husband isn’t working full-time, why doesn’t he put a bit of time into fixing up the house before you put it on the market? Whether he’s able to do the hardcore stuff depends on how good he is at it, obviously, but he doesn’t have to be a DIY guru to do basic stuff like painting - and that can make a solid difference in how much you get for the place.

20

One thing you might consider is selling the house and using the equity to get some sort of job retraining for your husband: I don’t know how much schooling he’s had, but is there a meaningful path to a career for him that involves going to school?

There’s no point in selling the house and using the equity to pay rent until it’s gone, because then you will be in the same boat without a house. It doesn’t sound like their is enough equity in it to make it possible to buy into a cheaper house with lower tax payments: you make it sound like their aren’t cheaper houses in your area. You can’t invest the equity anywhere in anything and make enough in interest to be worth bothering about right now. Using the equity to make your husband profitable again (if such a thing is possible–it depends on his field and what the problem is) would seem sensible.

ETA: I see now you say there ARE cheaper houses in the area that you could buy. That sounds very sensible. But I would still consider using whatever equity you have out (or even keeping some out) if there is any possibility for making your husband more employable. It might even make sense to borrow some money for the house (at <3% if you are putting 50%+ down) to make sure you have enough to make him profitable again.