[TracyLynnS]

I've been to a couple of legal type websites and haven't really gotten an answer to my questions. Here's my problem:

Four years ago, I bought a house and put 25% down, $100,000. My husband had been at his job 15 years and it was stable. Six months later, my husband's boss (the business owner) replaced him with his drinking buddy. The owner and drinking buddy have since run the place out of business.

So, six months after we moved in, we lost 40% of our income, the amount that my husband's unwarranted "demotion" sucked up. We had calculated that we could lose about 20% of our income and still manage financially. Since my husband had been with this company so long, he didn't want to leave, even after such a dispicable display by his boss and all my nagging, so he accepted the decrease in pay. By last year, though, they weren't making payroll so we aggressively started job hunting. Meanwhile, we've spent our savings thinking that 'good times would be coming back', and that this was a temporary financial set back, etc etc.

My husband landed a good job in January but the pay is still less than what it takes to manage the house payment, property taxes, and ridiculous energy bills. We'd like to get a smaller house closer to his work (he has a 3 hr daily commute now) with less expenses, and hunker down.

But this house is not going to sell. My asking price is well below what I paid for it and I will lose all of my downpayment. A 5 year old 7,000 square foot house 5 houses down on my street just sold for $311,000. My house is less than half that size! I can't even sell it for what I owe.

Should I go to the tax people and ask them to lower my property taxes based on the selling price of that house compared to what my house is valued at by the tax man?

Should I talk to a real estate attorney? Try to do a deed in lieu of foreclosure or see if they have any tricks up their sleeve that could be helpful?

Should I talk to my mortgage lender and see if they have any options for us keeping the house for 10 more years and hope to recoup the equity?

BTW, when I first moved here, the highest heat/electric bills were $350 per month. That was with the heat set at 68 degrees in the winter. After they raised the energy prices, it went to between $700 and $1,000 per month set at 60 degrees! That alone has sucked up every dollar we had.....

Advice?

Thanks,
-Tracy

[magellan]

Originally Posted by TracyLynnS

I've been to a couple of legal type websites and haven't really gotten an answer to my questions. Here's my problem:

Four years ago, I bought a house and put 25% down, $100,000. My husband had been at his job 15 years and it was stable. Six months later, my husband's boss (the business owner) replaced him with his drinking buddy. The owner and drinking buddy have since run the place out of business.

So, six months after we moved in, we lost 40% of our income, the amount that my husband's unwarranted "demotion" sucked up. We had calculated that we could lose about 20% of our income and still manage financially. Since my husband had been with this company so long, he didn't want to leave, even after such a dispicable display by his boss and all my nagging, so he accepted the decrease in pay. By last year, though, they weren't making payroll so we aggressively started job hunting. Meanwhile, we've spent our savings thinking that 'good times would be coming back', and that this was a temporary financial set back, etc etc.

My husband landed a good job in January but the pay is still less than what it takes to manage the house payment, property taxes, and ridiculous energy bills. We'd like to get a smaller house closer to his work (he has a 3 hr daily commute now) with less expenses, and hunker down.

But this house is not going to sell. My asking price is well below what I paid for it and I will lose all of my downpayment. A 5 year old 7,000 square foot house 5 houses down on my street just sold for $311,000. My house is less than half that size! I can't even sell it for what I owe.

Should I go to the tax people and ask them to lower my property taxes based on the selling price of that house compared to what my house is valued at by the tax man?

Should I talk to a real estate attorney? Try to do a deed in lieu of foreclosure or see if they have any tricks up their sleeve that could be helpful?

Should I talk to my mortgage lender and see if they have any options for us keeping the house for 10 more years and hope to recoup the equity?

BTW, when I first moved here, the highest heat/electric bills were $350 per month. That was with the heat set at 68 degrees in the winter. After they raised the energy prices, it went to between $700 and $1,000 per month set at 60 degrees! That alone has sucked up every dollar we had.....

Advice?

Thanks,
-Tracy

Yowzers! First things first: talk to a real estate professional or an appraiser in your area and find out what homes that are similar to yours have sold for, and not on your street either. They should be within a few miles of yours, similar size, similar age, similar neighborhood, same school district, sold within the last 6 months to a year. You can't compare your house to one that is more than twice as large as yours, even on the same street. You might not be aware of the condition of their roof, furnace, AC, foundation, construction, etc.. Plus, there is a very limited market for a 7000 square foot 5 bedroom home, especially if it is very old. To many people, 7000 square feet right now = a lot of upkeep, high taxes and high utility bills.

With how astronomically high your utility bills are, I'm guessing you have a home built before 1950? Or are you on propane? You might want to look at making your home more energy efficient. Even if it costs several thousand, you'll make it up in 6 months.

I would do that before doing anything rash with a real estate attorney or other proceedings. And definitely don't get mixed up with those "debt consolidation or debt management" places. That goes on your credit just like a bankruptcy (apparently).

[TracyLynnS]

Nope, it's not any energy efficiency problem, we had the house built four years ago and the bills were reasonable until about 2 years ago. There's been no major breakdown in the insulation, caulking, doors and windows, etc. I guess our local gas/electric company raised the rates here more than other companies in the surrounding areas.

We met with Green Path reps 18 months ago, their only suggestion was bankruptcy. They are government "approved credit counselors" according to the federal govt website. I assumed that they wouldn't use bankruptcy as a first alternative, considering that we do have a good steady income and would have the ability to repay if given a longer time span. We have no student loans, no auto loans, and the only credit card debt we have is several thousand that we spent on decent furniture to make the house more "sellable".

We're trying to avoid bankruptcy if possible. We had perfect credit until all this happened. I had hoped the professionals would offer more creative advice. Those places seem to specialize in helping educate people who overspend on credit cards, where our problem is a (probably permanent) drop in income with higher than expected expenses.

[bubbagirl]

You may be able to discuss your options with the mortgage company. You're basically robbing Peter to pay Paul right now, and this is only going to last so long before the train derails. Better to talk options now before the derailment happens.

I do know of people who have done mortgage buybacks with their homes.. basically a volunteer forfeit on your part. I have absolutely no idea how this will impact your credit.

There are also others I know that have voluntarily sent their unemployed spouse out of state where incomes are better. Some clients of mine just did this; husband was a mortgage broker barely making ends meet while wife had a steady school district position. He took a job in Arizona and set up shop there while she stayed here to wrap up the school year, house, etc. It may require a huge commitment with inconvenience, but what other options do you have when you don't have any other options?

So sorry to hear of your situation. I am wishing the best for you.

[athletesfoot]

I don't know if you've tried this, or if it would help much, but have you thought about refinancing? I have been hearing advertisements for 40 year and longer mortgages (ie "We know you didn't get a 30 year mortgage to pay off your house ASAP, so why not lower your payments by extending your mortgage to 40 or 50 years?") But you may even just be able to extend the balance of your mortgage out over another 30 years, thereby lowering the monthly payment on your house and hopefully allowing you to keep it until the market picks back up again, or your income improves. If you shave enough off the payment, it may make up for the other extra costs you are paying. And for energy efficiency, you could try shutting down rooms you don't use so you aren't heating and cooling them. HTH...sorry I don't have any better advice, but definitely communicate with the lender and see what options they have.

[magellan]

Originally Posted by TracyLynnS

Nope, it's not any energy efficiency problem, we had the house built four years ago and the bills were reasonable until about 2 years ago. There's been no major breakdown in the insulation, caulking, doors and windows, etc. I guess our local gas/electric company raised the rates here more than other companies in the surrounding areas.

We met with Green Path reps 18 months ago, their only suggestion was bankruptcy. They are government "approved credit counselors" according to the federal govt website. I assumed that they wouldn't use bankruptcy as a first alternative, considering that we do have a good steady income and would have the ability to repay if given a longer time span. We have no student loans, no auto loans, and the only credit card debt we have is several thousand that we spent on decent furniture to make the house more "sellable".

We're trying to avoid bankruptcy if possible. We had perfect credit until all this happened. I had hoped the professionals would offer more creative advice. Those places seem to specialize in helping educate people who overspend on credit cards, where our problem is a (probably permanent) drop in income with higher than expected expenses.

Just because they are "government approved" doesn't mean that it won't cripple your credit rating. The advice I've gotten is seek bankruptcy only when the creditors are banging down your door, which I don't think sounds like your problem.

As athletesfoot said, you may look at refinancing into a longer term loan to try lowering your payments. Have you pursued selling your home at all? Where are you located (generally speaking, you don't have to give your address )

[TracyLynnS]

I was also wondering, what happens to people in situations like this? We lost most of our income due to a huge pay cut and an enormous energy rate hike. There must be tons of other people whose pay decreases or job loss keeps them from being able to pay the bills they could normally afford. In my opinion, this is very different from the home owner who has the job and money but simply decides to buy Louis Vuitton handbags, fancy cars, jewellry, and vacations instead of paying his bills.

Remember the big oil bust of west Texas in the 80s? Entire neighborhoods were vacant with for sale signs in every yard. Did the banks take back those properties? Did they sell them for a low percentage of their value and make the unemployed former home owners live in their cars while making payments for the difference? Did all those Texas folks who were out of a job have to declare bankruptcy to get out from under paying for a house that's too expensive and not sellable?

Athlete's Foot,

I just started looking into the availability of a 40 year loan to help decrease the payments. I know other lenders offer a 40 year, but I have GMAC and they seem quite inflexible. I'll have to refinance to get the 40 year and will lose the 5.5% interest rate on my current mortgage. I sure hate to give up such a fantastic low rate, but I don't have a choice. If my current lender has no options for me, I'm definitely contacting a different company to try to refinance.

The another problem is that when we bought this house, we had extremely good credit. Now our scores are in the 500 -600 range. That means higher risk for the lender and much higher interest for me. Plus, they only look at your last 12 months of credit related activity to make the decision on if you get a loan or not. These last 12 months have been my worst credit since I started buying real estate in 1984. They don't care that I had great credit for the prior 20+ years. One lender told me that the underwriters consider the last 12 months to be the most reliable when judging your repayment habits. I had 5 late mortgage payments during those 12 months and that is certainly not indicitive of how I normally address my debt obligations. Those were my only late payments in over 20 years. It really irks me that I now have a reputation as a dead beat.

Plus, even if this house sells, with my poor 12 month credit history, will a lender even give me a loan? If we try to rent a house, they look at the credit when decided whether to lease or not. AND when my husband got his new job, they checked his credit. Initially, they were not going to hire him based on his bad credit. After he explained the whole situation they decided to take the risk and hire him. Also if his corp is considering someone for a promotion, they check their credit again and will not promote if they think you're a risk. Unbelievable! You lose a job which causes you to get bad credit, then you can't get hired anywhere else because you have bad credit!

I had been calling GMAC's main offices from January to April of this year expressing that I'm in a desperate situation and need help to avoid defaulting on my mortgage. Since they kept forwarding my calls between different departments and every rep I spoke with referred me to a rep I had already talked to, I decided to stop making the mortgage payments and force them to foreclose. (Why throw good money after bad?) Then I learned that if they sell my house for less than I owe, I could be still making payments on a house I no longer own. So, I went ahead and brought it all up to date. This afternoon, I made an appointment with the local GMAC office to sit down in person and hopefully not get the runaround any more.

We've even begun looking into a legal house swap (not any of the scam type things) and getting a lawyer to draw up the papers. A swap would be a significant savings on buyer's and seller's agent fees so I would have a better chance of giving a buyer a great low price while still protecting my credit.

On the energy costs topic, I already shut down any rooms not in use, so that helps. Luckily, I learned to be pretty thrifty since I quit my bank job to homeschool my kids for the last 18 years. We've been living on only my husband's income.

When the poo hit the oscillating air flow conveyance device, I needed to get a full time job. No one wanted to hire me because I'd been out of the job market for so long. (Or maybe they just checked my bad credit and figured I'd be a liability or embezzlement risk, who knows....) Now, I'm the manager of a medical clinic, am their website designer, biller, receptionist, laundress, janitor, accountant, insurance company liaison, toilet scrubber, in house "lawyer" (for real!), promotional literature composer designer and publisher, debt collector, IT guy, and so on. Since I'm a useless stay at home mom re-entering the workforce, I get paid a whopping $9 per hour for all that. The pay barely covers my gasoline and car insurance to get to work! I agreed to take the low paying job because no one else would hire me and we needed the money. Plus I had hoped to prove my value to the company and that would result in a pay raise every year or two but it never happened.

I decided to take a leave of absence for this summer to focus on keeping my house looking like a model home in the hopes that it would be appealing to buyers. And get this, by me being unemployed, we are actually saving money! One good thing that came from this low paying job fiasco: I've got a pretty good resume now and at the end of the summer, I'll be looking for a job that pays closer to what I'm worth. That income will definitely help!

Magellan,

We've had the house up for sale for 3 months and have 20-30 lookers. Some agents are bringing in buyers whose houses are even for sale yet! In this market, that is very discouraging to me as a seller. I just had a contingent offer for less than I owe, based on the 'buyer' selling his 7 acre horse farm for $650,000, in an area only 5 miles from my house. He's had 2 lookers in 3 months and has no possible buyer in sight. I cut $5,000 of my asking price today so we'll see if that helps.

The house is located in Milford Township, just a stone's throw from Livingston county. I absolutely *love* downtown milford and hate to have to move so far away to be near to hubby's work.

-Tracy