Negative equity

[seun]

Awoogah. Awoogah. Moan alert. The following is a big fat moan.

My wife and I bought our house about five years ago. Roughly half an hour after we signed the contract, the housing market collapsed, meaning our house is now worth £15-20k less than we paid for it. This, of course, means we have sod all chance of selling unless we somehow come into a load of cash. While we could sit tight and wait for however long it takes for things to improve, we couldn't be more pissed off. Our area has turned into a complete craphole in the last two years. If we ever have kids, it's the last place I'd want to raise them. Saying that, this entire city is the last place I'd want to raise them. So we're in a stickier situation since Sticky the stick insect got stuck on a sticky bun.

That is all. I don't feel better after moaning. Bah.

[Chris P]

That does suck! I wish I had a good answer for you, but all I have is warm fuzzy hopeful thoughts. I owned my house for ten years, and when it finally sold there wasn't enough money to even consider investing. "Housing is a great investment," my butt! I'd have been better off renting a place and pocketing the difference between the rent and mortgage payment.

*joins you sulking in the whine cellar*

[seun]

What's really annoying is knowing the house we moved from (while renting) is next to three in a row which are selling for less than our current house is worth. So while they're smaller, they're nicer, the area is better and they're about £25k less than they were in 2007/8. We could get a mortgage for one no problem if we could sell our house now.

[Myrealana]

I feel your pain.

Our house was built in 2001. We contracted for it in January and by the time we moved in ten months later, it was appraised at $40K higher than we paid.

Twelve years later, it's valued at what we paid in 2001. That wouldn't be so bad if we hadn't taken out a second mortgage to finish the basement and put in other improvements. Now we're under water and we can't even refi. All we can do is keep making the payments.

Financially, it would probably make better sense to do a voluntary forclosure and rent a place instead, but we really love this neighborhood and the schools. We don't want to move out and lose that.

[seun]

Originally Posted by Myrealana

I feel your pain.

Our house was built in 2001. We contracted for it in January and by the time we moved in ten months later, it was appraised at $40K higher than we paid.

Twelve years later, it's valued at what we paid in 2001. .

Ouch.

Another annoying thing (I've got a million when it comes to this) - last year, we spoke to my bank about mortgages before we discovered we were in negative equity. They said they could provisionally offer us a mortgage around £50K more than we got in 2008. We don't actuallly need that much value at all. It's nice in a way to know we could have it, though.

But again, the problem comes down to being unable to sell.

[Robbert]

Not sure if this will cheer you up...

Sitting on negative equity is one thing, repossession in case you were unable to keep up with mortgage payments would be worse.

[Lavern08]

I feel ya too.

Last year, we were in the same boat, but we bought another (almost brand new, gorgeous) house and are renting the "other" one that was "under water."

So far, so good - We have a fantastic realtor who handled all of the paperwork (credit and background checks, security deposits, etc.) for us. The tenants are actually renting-with-the-option-to-buy in 2 years.

We get enough in rent to cover the mortgage and incidentals.

[Chris P]

Originally Posted by Lavern08

I feel ya too.

Last year, we were in the same boat, but we bought another (almost brand new, gorgeous) house and are renting the "other" one that was "under water."

So far, so good - We have a fantastic realtor who handled all of the paperwork (credit and background checks, security deposits, etc.) for us. The tenants are actually renting-with-the-option-to-buy in 2 years.

We get enough in rent to cover the mortgage and incidentals.

I considered this, but I was on my way across the planet and didn't want to be an absentee landlord nor did I want to hire a rental management company who'd take a cut of what little money was going to come in. "The other annoying thing" was nobody would be willing to rent it for what the mortgage payment was. I'd have refinanced, but the high mortgage is another story I won't treadjack you with.

But that's a thought; could you rent it out?

[Robbert]

Originally Posted by seun

But again, the problem comes down to being unable to sell.

Doesn't it boil down to your unwillingness to accept a loss? You were saying your property is now worth 15-20K less than when you bought it. My question: If you were willing to bite this bullet, you could sell it, right?

If you decide to stay put and wait x number of years for the housing market to recover--so will the rest of the market. What is there to gain?

[shadowwalker]

Unfortunately, real estate as an investment is like stocks, only more so. It's a very long-term investment - even ten years isn't really long in real estate. And a lot of people bought when prices were artificially high, which makes short-term selling even worse.

There are ways out of it, of course, from renting it out to letting the bank repossess, and so many methods in between. Sometimes it just means keeping the property up and having patience.

[firedrake]

It almost makes me glad I rent. However, given the choice, I'd much rather have a home of my own, rather than toss a small fortune away every month on rent to a very moody landlord. But, since there's not a cat's chance in hell that (a)We'd ever be able to save enough for a deposit and (b)Never be able to afford a house in the UK, I guess I'm stuck in rental properties for the rest of my days. Not nice.

[seun]

Originally Posted by Robbert

Sitting on negative equity is one thing, repossession in case you were unable to keep up with mortgage payments would be worse.

This is true.

Originally Posted by Lavern08

I feel ya too.

Last year, we were in the same boat, but we bought another (almost brand new, gorgeous) house and are renting the "other" one that was "under water."

So far, so good - We have a fantastic realtor who handled all of the paperwork (credit and background checks, security deposits, etc.) for us. The tenants are actually renting-with-the-option-to-buy in 2 years.

We get enough in rent to cover the mortgage and incidentals.

We looked into the whole renting thing. Not possible since rent prices here are less than our mortgage.

Originally Posted by Robbert

Doesn't it boil down to your unwillingness to accept a loss? You were saying your property is now worth 15-20K less than when you bought it. My question: If you were willing to bite this bullet, you could sell it, right?

It comes down to ability to take a loss, not willingness. We'd obviously have to make up the shortfall between what we still owe (plus legal fees plus a deposit for a new house) and what we could sell for. Unfortunately, I don't have twenty odd grand sitting about not doing much.

[Chris P]

Originally Posted by firedrake

It almost makes me glad I rent. However, given the choice, I'd much rather have a home of my own, rather than toss a small fortune away every month on rent to a very moody landlord. But, since there's not a cat's chance in hell that (a)We'd ever be able to save enough for a deposit and (b)Never be able to afford a house in the UK, I guess I'm stuck in rental properties for the rest of my days. Not nice.

After my experience, I don't think I'll ever buy again. I could have rented a comfortable place for less than my mortgage, banked the difference and come out ahead. But hindsight 20/20 and all that . . .

[Lavern08]

Originally Posted by firedrake

It almost makes me glad I rent...

There is a certain freedom in renting.

You don't have to pay the taxes or insurance on the property as well as the maintenance if things need repair or replacing.

Also, you can always pick up and move whenever you want/need to without the headache of having to stage, sell and pay the fees associated with real estate transactions.

[seun]

As it's looking less likely for the UK market to get to any point where we could sell for a profit, I'm tempted to just wait until it picks up a bit, sell at enough to break even and go back to renting.

[Chasing the Horizon]

I think renting is pretty awesome. When things break it's someone else's expense and if you encounter a problem (bad neighbors, bad landlord, whatever) you can give your 60 days notice and be gone.

Foreclosure isn't such a terrible thing if you're upside-down on your house either. My parents went through it and my mom's credit was recovered enough to get into an excellent apartment complex and lease a new car within 2 years. You might have to accept living in a not-great place for a year or two while your credit recovers so you can get into the good places, but it sounds like you're already stuck in a far from great place.

[Robbert]

Originally Posted by Chasing the Horizon

...but it sounds like you're already stuck in a far from great place.

...adding insult to injury: far from great places recover less quickly than properties in a desirable location.

Seun, your idea to wait until the day you break even and then go back to renting sounds reasonable. And yet, it has its drawbacks.

1. Time
No one can tell you when (if ever) that day is going to come. If it does, rents will have risen accordingly.

2. Happiness
Did I read somewhere you are 36? Didn't you say it's the last place you'd want to raise your kids?

[sassandgroove]

with all the little repairs we need adding up I am beginning to wish I rented. Sorry about the loss of value. We lost value on ours too but thankfully we aren't wanting to move anytime soon. We were able to refiance for what we owed under a government provision last year, so we at least have a lower payment.

The house across the street from us is rented and after the previous tenants moved out I checked the listing and they are asking more than we pay for our mortgage for rent. But the previous renters were undesireable (they trashed the house) so I am thinking the owner was trying for a better tenant this time.

[jjdebenedictis]

Heh... I just bought a place...

I think Imma gonna stop reading this thread now.

**scarpers away, whimpering slightly**

[Chris P]

Originally Posted by Chasing the Horizon

Foreclosure isn't such a terrible thing if you're upside-down on your house either. My parents went through it and my mom's credit was recovered enough to get into an excellent apartment complex and lease a new car within 2 years. You might have to accept living in a not-great place for a year or two while your credit recovers so you can get into the good places, but it sounds like you're already stuck in a far from great place.

Yeah, the whole "it'll f**k your credit score" is just a hammer the banks use to keep you paying every month. Sure, it's inconvenient and might limit some bigger plans, but is it really the disaster they make it out to be? I might be willing to have a harder time getting a car loan or whatever for a few years if it means and extra $200+ in my pocket every month and the weight off my shoulders.

Originally Posted by jjdebenedictis

Heh... I just bought a place...

I think Imma gonna stop reading this thread now.

**scarpers away, whimpering slightly**

Hee hee! Don't let us bitter old cusses scare you. Buy a house because that fits your goals for pride of ownership and whatnot. But I'll never buy one thinking it's an investment again.

[seun]

Originally Posted by Robbert

...Seun, your idea to wait until the day you break even and then go back to renting sounds reasonable. And yet, it has its drawbacks.

1. Time
No one can tell you when (if ever) that day is going to come. If it does, rents will have risen accordingly.

2. Happiness
Did I read somewhere you are 36? Didn't you say it's the last place you'd want to raise your kids?

35 .

And yes, I wouldn't want to raise kids in my area let alone my town, but getting out of here is, at the moment, so far into the future, we probably don't have much choice if we ever breed.