how do we get rid of a lemon of a house?
August 25, 2008 8:54 AM Subscribe
What can we do to get out from under a lemon of a house? About 10 years ago, we bought a house that was a DIY fixer-upper with some serious issues. 10 years of graduate school poverty coupled with a couple of major illnesses that limited physical activity hindered our ability to make more than just the basic repairs. Now the house is even worse, and a new job has forced us to make an out-of-state move.
We are not at risk of default, but on the other hand, we don't have the savings or income to sell at a loss, or make more than cosmetic improvements. What are our options?
We are not at risk of default, but on the other hand, we don't have the savings or income to sell at a loss, or make more than cosmetic improvements. What are our options?
we don't have the savings or income to sell at a loss
Are you saying that the outstanding balance on your mortgage is more than the value of your house at this point? After 10 years of owning the house you should have a good buffer of equity saved up, but it's definitely possible to be underwater even after that much time with the way housing prices have been going lately.
If you just barely don't have enough to cover it, you can probably haggle with your mortgage company to get them to eat the difference. They don't want you to go into foreclosure and stick them with the job of selling the house, so they will generally make concessions to make sure that they lose as little money as possible from the situation.
posted by burnmp3s at 9:12 AM on August 25, 2008
Are you saying that the outstanding balance on your mortgage is more than the value of your house at this point? After 10 years of owning the house you should have a good buffer of equity saved up, but it's definitely possible to be underwater even after that much time with the way housing prices have been going lately.
If you just barely don't have enough to cover it, you can probably haggle with your mortgage company to get them to eat the difference. They don't want you to go into foreclosure and stick them with the job of selling the house, so they will generally make concessions to make sure that they lose as little money as possible from the situation.
posted by burnmp3s at 9:12 AM on August 25, 2008
a new job has forced us to make an out-of-state move
Forced? Are you in the military?
posted by TeachTheDead at 9:52 AM on August 25, 2008
Forced? Are you in the military?
posted by TeachTheDead at 9:52 AM on August 25, 2008
TeachTheDead wrote "Forced? Are you in the military?"
Sometimes people move. My wife and I moved because we had shit job prospects in State A, and a really good offer (career-wise) in State B. Which means our house in State A is for sale, while we pay rent in State B. "Force" is a relative term, for some kinds of jobs you can live and work anywhere, while for others - especially academic jobs - if you ever want to have a career, staying in the same place you went to grad school is a bad move, unless you want to have a fancy degree and no job prospects.
KJS, hope you don't have to just dump the place and walk. It's a shitty time to be selling any kind of a house. I feel your pain.
posted by caution live frogs at 10:16 AM on August 25, 2008
Sometimes people move. My wife and I moved because we had shit job prospects in State A, and a really good offer (career-wise) in State B. Which means our house in State A is for sale, while we pay rent in State B. "Force" is a relative term, for some kinds of jobs you can live and work anywhere, while for others - especially academic jobs - if you ever want to have a career, staying in the same place you went to grad school is a bad move, unless you want to have a fancy degree and no job prospects.
KJS, hope you don't have to just dump the place and walk. It's a shitty time to be selling any kind of a house. I feel your pain.
posted by caution live frogs at 10:16 AM on August 25, 2008
Response by poster: burnmp3s: Yes, that's the way it looks after inspection. But that is a valid option that I'll bring up the next time it comes around.
TeachTheDead: An irrelevant philosophical quibble. Lets just say that I'm much better off paying mortgage and utilities on an empty house than living in it without a career.
posted by KirkJobSluder at 10:24 AM on August 25, 2008
TeachTheDead: An irrelevant philosophical quibble. Lets just say that I'm much better off paying mortgage and utilities on an empty house than living in it without a career.
posted by KirkJobSluder at 10:24 AM on August 25, 2008
Can you rent it at a big discount to a grad student willing to do the improvements? Then you'd still get some income to cover the mortgage while increasing the value of the property?
posted by A Terrible Llama at 10:31 AM on August 25, 2008
posted by A Terrible Llama at 10:31 AM on August 25, 2008
Best answer: Its difficult to give you really solid advice without specific information (probably more specific than you are willing to post on the internet) about your financial situation. But here are some options:
(1) Sell the house, as is, at a loss. I know, you said that you don't have the income or savings to sell it at a loss. But it is still an option - it just means you will have to go into debt. I know it sucks, but you have to contemplate it. Think of it this way: would you rather sell it at a loss now, have a single lump sum that you have to pay off, but be free of the damn thing; or would you rather have the albatross of a home that you are still putting money into but getting no real return from, strung around your neck for years, possibly many years, down the road?
(2) Rent it out. I assume you are near a university, so there is probably a pretty strong rental market. This is not an ideal choice, and you still might have to take a continuing loss (e.g., rent it for less than your mortgage payment), but it may well be better than option (1). And rental properties don't have to be in pristine shape.
(3) Take out a loan to make some home improvements in order to increase its value, then sell. Either through refinancing, a second mortgage, or a loan, you can get the money to make some improvements. This is risky, because it might not improve the value of the home enough to recoup your expenses, so you might want to ask a real estate agent (or two or three) to give you some advice on whether this would be advisable. As someone above said, a new kitchen, bathroom, or roof - or even just some genuine improvements to improve curb appeal - can sometimes go a long way.
Ultimately, you need to sit down and run the numbers of these and other options to see which makes the most sense, and you need to be very hard-nosed about it. Ultimately, you need to distinguish between the emotional burden of selling at a loss (its a bit humiliating and forces you to admit that you made a mistake), and the financial burden (it is an expense, sometimes a frighteningly big one, but one like any other). Try to forget the former, and focus on the latter.
One final anecdote: my SO and I were in a somewhat similar situation: the house was actually good, but in a terrible neighborhood; we thought we couldn't really afford to sell at a loss; but we had to get rid of it because of a move. We wound up selling at a small loss, and are incredibly relieved that we did, because others in the neighborhood haven't been able to sell for months and months. The way we think of it now is that we paid the new owners a few thousand dollars to take the headache off our hands.
posted by googly at 11:43 AM on August 25, 2008 [1 favorite]
(1) Sell the house, as is, at a loss. I know, you said that you don't have the income or savings to sell it at a loss. But it is still an option - it just means you will have to go into debt. I know it sucks, but you have to contemplate it. Think of it this way: would you rather sell it at a loss now, have a single lump sum that you have to pay off, but be free of the damn thing; or would you rather have the albatross of a home that you are still putting money into but getting no real return from, strung around your neck for years, possibly many years, down the road?
(2) Rent it out. I assume you are near a university, so there is probably a pretty strong rental market. This is not an ideal choice, and you still might have to take a continuing loss (e.g., rent it for less than your mortgage payment), but it may well be better than option (1). And rental properties don't have to be in pristine shape.
(3) Take out a loan to make some home improvements in order to increase its value, then sell. Either through refinancing, a second mortgage, or a loan, you can get the money to make some improvements. This is risky, because it might not improve the value of the home enough to recoup your expenses, so you might want to ask a real estate agent (or two or three) to give you some advice on whether this would be advisable. As someone above said, a new kitchen, bathroom, or roof - or even just some genuine improvements to improve curb appeal - can sometimes go a long way.
Ultimately, you need to sit down and run the numbers of these and other options to see which makes the most sense, and you need to be very hard-nosed about it. Ultimately, you need to distinguish between the emotional burden of selling at a loss (its a bit humiliating and forces you to admit that you made a mistake), and the financial burden (it is an expense, sometimes a frighteningly big one, but one like any other). Try to forget the former, and focus on the latter.
One final anecdote: my SO and I were in a somewhat similar situation: the house was actually good, but in a terrible neighborhood; we thought we couldn't really afford to sell at a loss; but we had to get rid of it because of a move. We wound up selling at a small loss, and are incredibly relieved that we did, because others in the neighborhood haven't been able to sell for months and months. The way we think of it now is that we paid the new owners a few thousand dollars to take the headache off our hands.
posted by googly at 11:43 AM on August 25, 2008 [1 favorite]
Best answer: Try to find a realtor who's very active in your specific neighbourhood. They'll be able to give you the most realistic appraisal of what you can expect to get, and especially, what things you can do to maximise the returns for THAT neighbourhood.
posted by Artful Codger at 11:51 AM on August 25, 2008
posted by Artful Codger at 11:51 AM on August 25, 2008
Response by poster: Well, not the answers I wanted, but the answers I probably needed. Thanks.
posted by KirkJobSluder at 2:27 PM on August 25, 2008
posted by KirkJobSluder at 2:27 PM on August 25, 2008
Get several realtors to visit, assess the value (they are not appraisers, but can make a good guess) and make recommendations about what you should do to get the house in shape to sell. It's a crappy market, and if you overpaid, and/or the house is in crappy shape, you may have to suck it up.
In your circumstances, keeping it and renting it sounds like it would compound the problem.
posted by theora55 at 2:42 PM on August 25, 2008
In your circumstances, keeping it and renting it sounds like it would compound the problem.
posted by theora55 at 2:42 PM on August 25, 2008
Do you have major mechanical issues or just old appliances and fixtures? Selling a house is expensive. You need to pay the Realtor, handle repairs after the inspection, etc. Unfortunately if you've got no money, selling is really difficult.
A few pieces of advice and then an alternative suggestions.
Find an older, experienced agent. You don't want someone who's only sold houses in a booming market. Agents who continued to make their living selling homes through the 90's downturn are gold right now. When I sold my house, my agent was nearly 70. However, she had a support team that kept her on-line offerings up to date and her techniques were current to the marketplace. More importantly, she really knew how to sell a house. I got a solid price and a quick sale in a rough market. Find someone who can sell a home during a down market.
The best of thing you can do to make the house more appealing costs nothing but time and energy. Make the house and yard scrupulously clean. Mow the yard, do the edge trimming, sweep the steps and sidewalks, scrub the bathroom and kitchen, wash and iron the curtains, fix any wobbly items (door hinges, towel racks), lubricate hinges, closet door tracks, etc. Cleaning makes a huge impression and your house will look much better maintained. The next level costs very little. Remove most of the furniture and all of the clutter (storage unit costs), get higher wattage light bulbs, replace dirty or worn outlet/light switch covers, power wash the exterior if it's dingy. Total investment is less than 100 bucks and a few weekends of hard labor. If you can swing it, paint any rooms that look dirty. That might take you to 500 bucks. Skip the major repairs that you can't afford. It sucks to do this grunt work; do it anyway.
Your other option is to try and rent to someone who will take better care of the place. Is there someone in your network who's good with tools and willing to work on the house for reduced rent? You could try to wait out the market while someone rents/repairs. This is a dangerous path. You'll still have holding costs on the house, materials costs for the repairs, risk that the renter won't do a good job and risks that the market won't rebound quickly enough. Plus, you'll need to be back and forth from the new place to the old one. It's an option if you can find a very reliable person to rent.
My gut response - fix what you can and price it as aggressively as you can afford.
posted by 26.2 at 4:30 AM on August 26, 2008 [1 favorite]
A few pieces of advice and then an alternative suggestions.
Find an older, experienced agent. You don't want someone who's only sold houses in a booming market. Agents who continued to make their living selling homes through the 90's downturn are gold right now. When I sold my house, my agent was nearly 70. However, she had a support team that kept her on-line offerings up to date and her techniques were current to the marketplace. More importantly, she really knew how to sell a house. I got a solid price and a quick sale in a rough market. Find someone who can sell a home during a down market.
The best of thing you can do to make the house more appealing costs nothing but time and energy. Make the house and yard scrupulously clean. Mow the yard, do the edge trimming, sweep the steps and sidewalks, scrub the bathroom and kitchen, wash and iron the curtains, fix any wobbly items (door hinges, towel racks), lubricate hinges, closet door tracks, etc. Cleaning makes a huge impression and your house will look much better maintained. The next level costs very little. Remove most of the furniture and all of the clutter (storage unit costs), get higher wattage light bulbs, replace dirty or worn outlet/light switch covers, power wash the exterior if it's dingy. Total investment is less than 100 bucks and a few weekends of hard labor. If you can swing it, paint any rooms that look dirty. That might take you to 500 bucks. Skip the major repairs that you can't afford. It sucks to do this grunt work; do it anyway.
Your other option is to try and rent to someone who will take better care of the place. Is there someone in your network who's good with tools and willing to work on the house for reduced rent? You could try to wait out the market while someone rents/repairs. This is a dangerous path. You'll still have holding costs on the house, materials costs for the repairs, risk that the renter won't do a good job and risks that the market won't rebound quickly enough. Plus, you'll need to be back and forth from the new place to the old one. It's an option if you can find a very reliable person to rent.
My gut response - fix what you can and price it as aggressively as you can afford.
posted by 26.2 at 4:30 AM on August 26, 2008 [1 favorite]
26.2 has some great advice. If you do decide to sell, let me add a couple of things.
If saving money is really important to you, then you don't need to get an agent at all. This can save you thousands of dollars, which is good in itself, but it also means that you can afford to sell the house at a lower price, because you won't be paying an agent's commissions. We sold our house on craigslist in a down market, and managed to have a stream of interested buyers looking at our house while houses on the same block, represented by agents, had no viewers for months on end. Its very time-consuming, because you have to do a ton of research and legwork, but it is much, much, much cheaper.
26.2 is right about the little things making a big difference. The "curb appeal" of your house gets people in the door, and the little touches keep them looking at it. It may seem counterintuitive, but ugly paint and dim lighting (which is immediately evident) can turn a potential buyer off more quickly than the prospect of a having to replace the roof (which comes up later and can be negotiated).
MeFi mail me if you want more suggestions along these lines.
posted by googly at 7:15 AM on August 26, 2008
If saving money is really important to you, then you don't need to get an agent at all. This can save you thousands of dollars, which is good in itself, but it also means that you can afford to sell the house at a lower price, because you won't be paying an agent's commissions. We sold our house on craigslist in a down market, and managed to have a stream of interested buyers looking at our house while houses on the same block, represented by agents, had no viewers for months on end. Its very time-consuming, because you have to do a ton of research and legwork, but it is much, much, much cheaper.
26.2 is right about the little things making a big difference. The "curb appeal" of your house gets people in the door, and the little touches keep them looking at it. It may seem counterintuitive, but ugly paint and dim lighting (which is immediately evident) can turn a potential buyer off more quickly than the prospect of a having to replace the roof (which comes up later and can be negotiated).
MeFi mail me if you want more suggestions along these lines.
posted by googly at 7:15 AM on August 26, 2008
This thread is closed to new comments.
2. I remember reading somewhere that new kitchen appliances and remodeling the master bath give the highest returns on home improvement. So do those.
3. rent it out?
posted by lockestockbarrel at 9:07 AM on August 25, 2008