Suggestions on managing underwater mortgage and cross-country move
June 26, 2012 7:52 AM Subscribe
Due to a new job, my family and I (wife, 2 kids, 2 cats) need to relocate from the DC area to Oregon in the near term future, ideally before the start of the Oregon school year (approximately September 1st). The wrinkle: how to deal with our currently-somewhat-underwater house in the Maryland suburbs of DC.
posted by anonymous to work & money (14 answers total) 4 users marked this as a favorite
We had an initial meeting with a realtor earlier this week to go over what we need to do to prep the house, discussing timing of listing, and so forth. We're looking at somewhere between 3K and 8K worth of work to get the house into the condition where we could list and show it (which includes both some needed repairs as well some packing and purging that we're going to need to do anyway).
Based on what the realtor is advising we list the house for as well as our current "pay-off" numbers on our first and second mortgages, we're going to loose between 25K and 50K if we sell the house (that includes the difference with what we owe, the realtor commissions, and the money we need to spend on "prepping".) Now, we *are* going to make the move -- jobs have been accepted and it's the right long-term thing for our family to do -- I'd just like some input on other options we might have that can reduce or minimize the amount of money we're going to lose. Important to note is that our income will stay approximately the same after the move, and while we could handle paying our mortgage and rent in Oregon for a short period of time, we'd rather avoid that if at all possible.
The options on the table are:
1) Take the hit and sell the house -- in some ways this is the most appealing option, because it largely resolves things. We would need to get a loan to cover the difference between the sale price and the pay-off number, possibly with the assistance of family co-signers, and would be able to pay it back off with a few years due to the lower cost of living in Oregon relative to DC (we're going to go from ~$4K/month mortgage to ~$1K/month rent).
2) Rent the house out (through a management company) and sell it a few years down the road, once the market has improved further and we've further paid down the mortgage. The idea would be we keep paying the mortgage as we are now and use the income from the rental to cover our rent in Oregon. This seems like a potentially good way to go, but we have no idea how one goes about renting out their house, how to evaluate management companies, how long we might have to wait before getting tenants, and so on.
3) A strategic default: line up housing in Oregon, move, and just stop paying the mortgages. This is more of a "last resort" solution, and the short and long-term consequences of this approach aren't very clear. Can we notify the bank that we're giving back the house and just mail them the keys and have them handle selling the house? Do we try to get them to allow a short sale or do some sort of principal reduction? I know that Maryland is a recourse state and that makes this approach less tenable than if we were in a non-recourse state. Are there lawyers that specialize in this type of stuff that I should be talking to? (And how does one evaluate them? This isn't exactly a pool-side conversation with the neighbors...)
4) Some other option we're unaware of that you can suggest.
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TL;DR: Need to move cross-country within the next few months; have to figure out how to deal with house with underwater mortgage in the least financially painful way.