

Ask HN: How did you come to the decision to sell your house? - hnta1234567890

I bought a house four and a half years ago which, although it was more house (in terms of size) then I needed, it was well with within a respectable percentage of my salary.  Fast forward to today and I've put approximately $71K into the house and currently according to zillow / eappraisal I'm between 4K and 10K underwater.  I like the location and house but am not so attached to it that I wouldn't sell it.  I'm single in my mid thirties with no outstanding debt outside of the house.  I believe in honoring your debts but I also want to be pragmatic.  I've been unemployed for the last six months and while I could last longer by using my retirement savings I'm not sure it would be a good decision.  I keep seeing houses on the market that look equally as nice as mine for $30-50K less and part of me thinks the best strategy at this point would be to sell (short if I have to) this house and re-evaluate my situation a year or two down the road.  I looked at renting the entire house out but my mortgage agreement prevents it and while I can rent a room, rentals in my area are so cheap that finding a good renter has been difficult.<p>Even if I find a job tomorrow I'm unclear as to whether or not keeping the house is the best decision so I'm curious how others have come to the decision to sell their house.
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kls
_I've been unemployed for the last six months and while I could last longer by
using my retirement savings I'm not sure it would be a good decision._

I personally would not go into retirement for an asset that is underwater and
that is most assuredly going to go underwater further. It is almost
universally agreed among economist that have not been cheerleading for the
past 5 years that inflation is coming, when it does house prices will decline
further. That coupled with the mortgage fraud crisis means that housing
recovery is a long way off.

Rationally looking at the situation you are below zero, putting your
retirement into it, compounds the problem because you are not elevating the
sinking asset while you are depleting hard cash. It's the old don't throw good
money after bad.

 _I believe in honoring your debts but I also want to be pragmatic_

We each have to come to grips with what we find acceptable, some things to
remember though are that you may have paid into mortgage insurance, to insure
the home from a default. Some people see that as a ethical out, after-all if
you paid into it you secured the bank from the event, you should be entitled
to utilize it. Others find it ethically agreeable that the banks where bailed
out with public money, and therefore the public has the right to in-turn ease
the burden on themselves, it is the moral hazard argument that people raised
in bailing out the banks. That if we did so, it would give people the ethical
right to opt out of being the one holding the bag. It is a moral hazard but I
do see both sides of the argument. For me personally I believe we are a
civilization of people first, I know at this particular time we sometimes
don't act like it, but my personal ethics are people are the most important.
As such I believe no person should be asked to personally bear the brunt of
any socitial issue, if an issue is causing suffering, which I consider
financial hardship to be, then I think that we as a society should support
them remedying that situation, even if it contributes to the problem. What we
can't have is a class of entities like the banks who are able to pass the
burden and then citizens, who are then expected to grin and bare it. To do so
asks members of our society who have the least resources, to suffer for the
common good. Personally I think we are long past the moral arguments of
walking away, either by short sale or foreclosure. Asking homeowners to bare
the cost of propping up the inflated housing market, when we did not do so
with the banks is unethical in my world view. We as Americans seem to hold a
double standard on issues like this, where companies are given a free pass,
but yet the citizens are held to a code of honor. It leaves the population
ripe for exploitation, by creating two distinct sets of rules.

~~~
hnta1234567890
kls, Thank you. I can't tell you how much I appreciate your answer. I may not
have a choice in the matter but if I were to get a job does that change your
outlook or at this point is any money put towards an underwater mortgage that
is likely to decline further "throwing good money after bad"?

~~~
kls
I think we are looking at at least 10% more losses in housing and possible as
much as 20% with a long flat period in demand after that. Please keep in mind
I an not an economist nor is finance my trade, but I do listen to a lot of the
economist that where right about the situation and have continued to be right.
They see the bottom anywhere down to 20% more. If I personally where in your
position, I would cut my losses now, given that you do not know what tomorrow
will bring. Even if tomorrow brings a job, you are in a better financial
position by walking. Especially if you have enough in savings to pick up
another house once the market bottoms. To me you are in an ethically good
situation to do it, and it makes the most financial sense. If it where me
personally I would not seek to do a short sale as you have already chased it
down to where you are at retirement funds, destroying yourself to honor an
obligation should not be expected, which is a possibility because you will be
responsible for payments while it is in short sale and demand is too far down
to take the bet that it will sell soon. As well not that this should affect
your decision, but foreclosures have taken several years to go through, with
the mortgage fraud in some states they are virtually stopped and do not look
to be starting up anytime soon. If you do choose to default, you will be in
the home for a long time, you can utilize this time to rebuild your life. If
you chose to vacate it, it would sit empty for that period, and in may cases
the banks prefer that the owner remain in the home so that it is not stripped
or vandalized while all the legal process is worked out. If you would like to
talk more about it please email me, my email is in my profile. I had a good
friend go through this situation, so I am familiar with the turmoil.

~~~
hnta1234567890
kls - Thanks again I really appreciate it.

