What would you do?

[Common Sense]

A friend of mine asked me this question today? If you have worked hard all your life and purchased a home for $600,000. Only to find out that 12 months later the home is now worth $480,000. How would you feel and What would you do? This is his dilemma?

 

[stefan olafson]

I guess our friend found out the hard way that values don't always rise in real estate. It's very unfortunate but it does happen. I've been in the business since 1979 and have seen a number of swings in the market. Granted nothing like the melt down in some areas of the country right now, but adjustments in the market.

What I believe happened is for some reason it was decided that every Tom, Dick, or Harriette should and could buy a house. Unfortunately the world doesn't work that way and a lot of people who purchased property in the past two years have walked away losing nothing or everything.

Tell your friend to hang onto the property if possible. If he could afford it when he bought it hopefully he can afford to hold it until the market corrects again, it always does.

 

[c w d]

A friend of mine asked me this question today? If you have worked hard all your life and purchased a home for $600,000. Only to find out that 12 months later the home is now worth $480,000. How would you feel and What would you do? This is his dilemma?

That's a 20% drop. If I were your friend I'd thank my lucky stars that it wasn't more through an over inflated appraisal. Perhaps he should buy a new home and let this one default as others are doing.

 

[JoTetherow]

he could do what I did

I bought a house in 1981 in western PA for 50k

the next day, all the steel mills closed.

in 1982 it was worth 40K

in 1983 it was worth 30K

i moved out, rented it for 450/mo which covered my expenses and moved away.

in 2005 i sold it for 53k. never missed a rent payment..only had 2 renters in that time period. the first kept asking if it was ok if they could do things like replace the garage roof and recarpet the living room. i said suuuuuure, be my guest.

i sold the house to the 2nd tenant.

jo

 

[Elliott]

I'd enjoy living in it. What are the alternatives. Sell it for
$480,000 so he'll lose $120,000? Walk away and ruin his
credit rating for the next 10-20 years. Then go buy something
worth $480,000?

 

[c w d]

I bought a house in 1981 in western PA for 50k

the next day, all the steel mills closed.

in 1982 it was worth 40K

in 1983 it was worth 30K

i moved out, rented it for 450/mo which covered my expenses and moved away.

in 2005 i sold it for 53k. never missed a rent payment..only had 2 renters in that time period. the first kept asking if it was ok if they could do things like replace the garage roof and recarpet the living room. i said suuuuuure, be my guest.

i sold the house to the 2nd tenant.

jo

You lost money. Adjust for inflation.

 

[Elliott]

First House....Purchased $43K, sold $85K (2 years)
Second House....Purchased $125K, Divorce value $425K (11 years)
Third House....Purchased $225K (after divorce), Value now $900K. (15 years)
Vacation Home....Purchased $112K, Value now ($550K) (22 years)

Real estate has been very, very good to me, but they are just houses.

 

[Lee Lansford]

A friend of mine asked me this question today? If you have worked hard all your life and purchased a home for $600,000. Only to find out that 12 months later the home is now worth $480,000. How would you feel and What would you do? This is his dilemma?

Tell him to hold tight. As long as he does not plan to move any time in the near future, time has a way of curing a lot of ills.

 

[timd354]

A friend of mine asked me this question today? If you have worked hard all your life and purchased a home for $600,000. Only to find out that 12 months later the home is now worth $480,000. How would you feel and What would you do? This is his dilemma?

I cannot give you an intelligent answer to the question without knowing his entire financial situation and future plans. I will say this much though....big businesses, including banks have no problem renegotiating deals, getting bailed out, restructering debts, walking away from deals, etc. when it makes business sense to do so. Heck, a lot of these mortgage companies feel there is no need to pay their appraisers in a timely manner or, if the appraiser did not play ball, pay them at all. It is only private individuals that are supposed to have some sort of moral obligation to not to walk away from or renegotiate deals and just continue paying no matter how stupid of a business decision that may be. Seeing how the mortgage banks in large part created the real estate bubble through their fraud, use of bogus appraisal, their proliferation of unsound credit standards and lack of underwriting, he should not feel bad about hanging the loss on the loss on the mortgage bank if that is the sensible thing to do business wise. Mortgage lending is a business, and defaults are just part of the business. People should treat banks and mortgage companies exactly as they would treat us, no better and no worse.

 

[timd354]

I'd enjoy living in it. What are the alternatives. Sell it for
$480,000 so he'll lose $120,000? Walk away and ruin his
credit rating for the next 10-20 years. Then go buy something
worth $480,000?

If he pays all of his other bills on time, his credit rating will come right back in 2-4 years after the foreclosure and he will have no problem getting a new FHA guaranteed mortgage loan. I worked for a lender for over 10 years and know the lending guidelines inside/out.