Need opinion and options on situation

[Rebel78]

What is the name of your state (only U.S. law)? Arizona

Hey everybody, looking for some advice on my situation, I'll give a rundown of it, any opinions or info would be greatly appreciated.

I bought my home in May 2005 in Anthem, Arizona. I paid 304K for it. I did an 80/20 5 year arm with interest only payments the first 5 years. The most recent comps in this neighborhood give it a value of around 170-180K. Anthem has been hit extremely hard with foreclosures, the area was really booming during the bubble, but it's one of the hardest hit areas in AZ now. So I'm facing at least 100k in negative equity.

I'm getting married to my fiance later this year, and we are looking to move to start a family in the Midwest. The tricky part of the situation is that I can afford my payments, have an annual income of ~115k per year, have about 68K in liquid savings, only debt is student loans which is 300 a month.

Everything I have read (short sales, HUD short refis, etc.) only seems to help if you are behind on payments and can't afford them. I really didn't purchase a home I can't afford, but this negative equity has me chained to the home. I've thought about doing many things, including letting it foreclose. My fiance has great credit, as do I right now, and I figure if I can put down 65K on a 200K house in Missouri, with our vehicles paid for, I really could get by without credit for quite a while, perhaps apply for the mortgage under her name. But the idea really scares me, and I'm a pretty ethical person, the whole idea of passing off a debt bothers me.

I just feel I bought at the worst time, I wanted to do a fix rate when I bought, but figured it didn't matter b/c I wanted to move in a few years anyway. Now the community has fallen apart value wise, and the negative equity is killing me. It really doesn't matter if I had done a fixed rate, the value has dropped so fast, and I'm not blowing the money that I'm saving on my payments. I live well within my means, we've saved almost 70K in 3 years, but the whole idea of giving it all to a mortgage company because our community was full of investors who have mailed their keys to the banks just kills me. It would be like starting over. I feel like I'm weighing which is worse, ruining my credit or writing a check to my mortgage company for 100k.

I know the best idea is to stay put, but we are getting married and really want to move on with our life, and it seems like I'm stuck. I don't see this area turning around anytime soon, especially considering the size of the loss I have.

I almost feel guilty because so many people are in much worse situations, but it seems like there is quite a bit of help out there for those folks. Trying to figure out what someone like me should do or can do is pretty tough.

Any ideas or help would be greatly appreciated!

 

[FlyingRon]

Actually, the home was on your very threshold of affordability given your income and other outstanding debt. You have become the victim of the housing burst in that you can easily extricate yourself from the affordability issues.

Bringing a check to closing on selling may not be the most pleasant thing to do, but it is the RIGHT thing to do. You may have to forestall ownership of a replacement home until you are more financially secure.

 

[nextwife]

Actually, the home was on your very threshold of affordability given your income and other outstanding debt. You have become the victim of the housing burst in that you can easily extricate yourself from the affordability issues.

Bringing a check to closing on selling may not be the most pleasant thing to do, but it is the RIGHT thing to do. You may have to forestall ownership of a replacement home until you are more financially secure.

Or, hold off on your move to the Midwest until the timing is better to sell your home. You are making a CHOICE to sell and move in a "down market".

A question: If you bought an expensive car, financed 100%, and then CHOSE to sell it, maybe a year later, because you now want something different now, wouldn't you KNOW that you'd need to bring cash to closing to make up the value shortfall? This is no different.

Real estate was never meant to be a short term investment, in which one was certain they could turn around a relatively short time later and not risk a loss. Real estate is supposed to be seen as a LONG term investment. If this is not a financially adventageous market in which to sell, you should either not sell, or deal with the consequences by bringing cash to the table, the way people have done for decades..

 

[UtahBronco]

Rent it out! Lease it out! Lease with option to purchase! There are a lot of options you haven't considered yet.

For example, if you purchased the house @ 304K, I'm guessing your payment with taxes/insurance/etc is around 2000 a month (give or take).

If you could rent the place out for $1200 to $1500 a month, your net loss would be 800 to 500 a month. 500 a month would take 16.6 years to equal $100,000.00. I think that the housing market will come back, even in AZ, before 16 years have passed.

There are dozens of good rental companies out there. Heck, even Realtors will do a residential lease now and then. Talk to the Realtor that sold you your house. Or, hit Craigslist, list your house for rent with some pictures, and see what bites.

I'm in real estate here in Utah (not an attorney) but I close about 10 short sales a month and they are with all sorts of people, homeowners, investors, rich and the poor. A hard ship letter is the main thing that makes you qualify for that short sale.

PM me if you have any more questios, I'd be happy to help.

Sincerely,

UtahBronco

 

[publius]

Rent it out! Lease it out! Lease with option to purchase! There are a lot of options you haven't considered yet.

For example, if you purchased the house @ 304K, I'm guessing your payment with taxes/insurance/etc is around 2000 a month (give or take).

If you could rent the place out for $1200 to $1500 a month, your net loss would be 800 to 500 a month. 500 a month would take 16.6 years to equal $100,000.00. I think that the housing market will come back, even in AZ, before 16 years have passed.

This is a good idea. You (original poster) must have a fair amount of disposable income if you were able to save $68k in three years. You also mentioned putting your savings into a a down payment on a $200k home in Missouri. Heck, if you only put $40k down on the new home (20%), that leaves $28k in the bank that should cover the shortfall from the rent on your Arizona home for almost three years, without even considering your monthly disposable income. Chances seem fairly good that the housing market will be recovering at least somewhat three years from now, and you will be able to raise the rent closer to your mortgage payment and be the proud owner of TWO homes.

 

[Rebel78]

Thanks for all the help.

Renting is seeming like the way to go. I'm just hard-headed, and hate to think I may lose money on this house. It is my home, but I can't help but to look at it as an investment.

I may get with a mortgage counselor, and see if I can get the mortgage company to agree to a fixed rate, even if it raises my payments quite a bit, at least I wouldn't be paying through the nose in interest.