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In IL - rent or short sale, we can't agree, house more than $100k

Posted by MojaveLove (My Page) on
Fri, Jul 6, 12 at 14:04

I apologize in advance for the length of this post but I think the more information, the better you may understand the situation. Plus it is therapeutic lol.

My husband and I are newlyweds. Before I knew him, in 06/07 he was making $120k and made a very poor decision to buy a $215k town-home with all of the upgrades before he saved up, he figured it would be easy money. Market goes kaput right after he moves in. He's in construction, starts making less money but is still able to pay bills. His mortgage is $204k now, 5 years later. All listed town-homes in our area right now are short sales or foreclosures and going between $65k & $95k. For whatever reason he is having trouble grasping the idea that these short sales and foreclosures bring down the worth of ours and that town-homes are pretty much judged to be the same even if there are minor differences. Like our realtor said, the upgrades will just help it sell faster.

I want to try for a short sale but he is intensely against affecting his credit & I'm scared he will make a bad decision because he is so dead-set on this. Renting to me is way too risky � my mom is in real estate and has nightmarish stories of bad renters that are scamming people right now because they APPEAR good on paper. We could get bad renters that don�t pay, that destroy the place, plus we have the responsibility as landlords, have to cover what rent doesn�t cover, plus we will STILL owe tens of thousands of dollars on the mortgage, even many years from now. We pay $1600 a month (including money for property tax) and estimated rent for our property is $1200/mo which is still below the pure mortgage payment. In 2 years his refinanced ARM rate goes up. He keeps saying "I'll just refinance again" but the bank can say no�. so in a few years the mortgage payment could potentially go up. Realistically we would have to cover about $400 ourselves each month. I�m sure there are many other risks and cons that I don�t know about yet.

I prefer a short sale - credit can rebound but we can't recover from a home losing over $100k in value. My master plan is this: I have an acre of land that will be paid off in 3 years at the latest. I am required build by that time which is why we can�t stay in the town-home. We are going to build a home ourselves (he is a carpenter and has built many homes in the past, family is in the biz), loan would probably be $150-200k which would then become a FIXED RATE permanent mortgage and we would have no problem with this. This can be done on my credit alone. Ideally I would like to short sale, live with some parents for 6 months (not ideal but we�re only 27 and can get back up on our feet), pay off all of our debt plus save a bunch and then live in an apartment until the house is built. To me this is a no-brainer but he won�t get past the part about how his credit will be affected.

I have been in contact with a lawyer in Chicago to get answers to all of my questions. I am writing here because he is out this week and I can't stop thinking about it and worrying. I am not on the home's loan or the title and want to be transparent in this if we go this route. My concerns: we did file our taxes together for 2011 and he is on the title of my land and I don't want his lender (Wells Fargo) to come after my land. For a few years he actually had to work out of state because he was unemployed in Chicago but that was a year ago so I don't know if that could still be a hardship but it drained his savings - he was making less, plus gas driving over 120 miles a day in a truck that has horrid gas mileage, but he needs because of work.

He makes a lot less now than when he bought, but now that we�re married my salary covers the loss that he has had. We still struggle though because we both have car loans (mine�s up in a few months), I have a land loan, we both have credit card debt (I don�t have that much but he does have an uncomfortable amount), I have a school loan, he has a jewelry loan. I have taken over all finances but he was really bad about paying all bills on time and spent a lot of money each month getting things turned back on, catching up on unpaid bills, etc. I�ve recovered us from all of that but savings is minimal and we just seem to be getting by each month. He does have a significant annuity and I hope the bank can�t go after that or my 401k.

It feels like I'm the only one of us that seems to understand the gravity of this situation. I knew all of this from the beginning so it isn't a surprise to me but it is finally taking its toll and I am starting to succumb to the intense stress. Please offer me your insight on the situation. I know the Mortgage Debt Forgiveness act expires soon which has increased the stress ten-fold. I�m starting to just be completely overwhelmed by this.

Thank you for reading all of this, I know it was long but it makes me feel slightly better for about 5 minutes or so lol.


Follow-Up Postings:

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RE: In IL - rent or short sale, we can't agree, house more than $

How about responding to all of the helpful suggestions that you got the first time you posted here?

You can always sell your land as that seems to be the current impetus for your hand wringing. It wasn't a wise purchase given the current situation. Otherwise, just staying put an living your life in a pretty nice residence doesn't seem to have occurred to you.


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RE: In IL - rent or short sale, we can't agree, house more than $

Thanks for the helpful response.

The situation is a little different now so I figured it warranted a new post. You don't know anything about the land or me and you are making assumptions.

Forget it, I don't know what it is about this but people can be so rude here. I thought I could come here for help in a pretty bad situation, I've only been on my own for a year, married for only a few months and I can't get help or advice from family. I've never seen anything like this economy in my life, nor have most of you, I'm only in my 20s starting out and this is the crap I start out with and I'm trying my best to make it right and survive in it, forgive me for irritating you.


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RE: In IL - rent or short sale, we can't agree, house more than $

Is there something incredibly unique about this land? I think you are already overextended and building is the last thing you need right now.

Honestly, I think you need to start cutting some stuff loose. Maybe the land, maybe a second car, maybe a different vehicle for his work. Something.

I agree that having renters is a terrible idea.

Why is staying in townhouse so distasteful? I get that it's not *ideal*, but out of curiosity, what is the square footage and number of beds/baths?


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RE: In IL - rent or short sale, we can't agree, house more than $

Wanted to add, let me know if I understand this. You want him to take the hit on the short sale of the townhouse and then you'll get the mortgage for building? I'm no expert, but I always thought married couples couldn't have their credit separated like that.


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RE: In IL - rent or short sale, we can't agree, house more than $

Unless your state is unique (or you two signed prenups), generally once you're married, what affects one, affects the other financially.

Look, the first response may not have been to your liking, but I, too, cannot see why you're laying all this at your husband's feet when you, too, made a poor choice in buying land upon which you say you have a limited time to build on.

The simplest solution to your problem IS to sell the land and live in the town home while you give yourselves time to recover financially, and the real estate market in your area time to recover so you can sell at less of a loss.

I guess you're not going to like my response, either, but it's really hard to read your post and figure anything that's going to work out better for you. The sad thing is, the 2 of you are acting like roommates who each want their own way, rather than a married couple who wants to work together to find the best solution for the couple

I hope you find a way to make this all work out for you, and wish you well.

Given the horrendous weather many areas of the country have experienced in the past week--has your husband considered that there IS a LOT of work out there for someone who is willing to work hard to rebuild the areas that have been devastated? Might involve relocating temporarily, but that would be a small inconvenience given the opportunities for him.


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RE: In IL - rent or short sale, we can't agree, house more than $

I agree with you on the gravity of your situation. But I don't think his home purchase is the main--or only--cause. It appears that you've got a slew of "poor decisions" namely:
credit card debt
student loan
2 car loans
jewelry loan
land loan
townhouse mortgage

I think you're reacting to the drop in the townhouse's value. Here's the test: If comps were selling for $215K would you still feel the way you do? If you're like most of us, your answer would be "no." Or maybe because of his drop in income you'd still feel pinched. I know I'd feel crazy with all those debt payments every month. But then where would (and should) your focus be? Paying down all your other debt, right?

So do that now. If you don't have enough traction (i.e., extra money each month to pay more than the minimum payments) then sell one or both of your cars and drive something cheaper until you get your head above water. What's the land worth? That's another option to sell, just to get your life simpler and less crazy. You can always buy another lot and build on it later when your financial house is in order.

I suspect that part of your husband's reluctance to short sale is a sense of obligation to pay the debt he signed up for. And by marrying him you signed up for it as well (morally, if not legally). It sucks, but life happens. And FWIW, Wells Fargo is unlikely to approve a short sale if you've got assets like the annuity and the land. They can't go after retirement assets.

I would NOT rent (you don't need that added craziness) or live with parents (I'd sell cars and drive something cheaper before I'd do that). It sounds like you've got a very decent income between the two of you to buckle down, make some sacrifices to your lifestyle, and get on top of this thing without moving into the in-laws' basement. That would be the route if you had a serious job loss or something, but it doesn't sound like you're there.

You're in a hole, but I think you can dig out of it. I'd just recommend a different shovel than you're proposing to use.


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RE: In IL - rent or short sale, we can't agree, house more than $

If you do a short sale, there is no way you'll get approved for financing to build a home in time for your deadline. You can give up that dream. Not gonna happen. You're not gonna be in any position to build for at least 5-10 years and your deadline on this land will have passed. Sell the land. And you've got to get rid of some of that debt first and start saving. That needs to be a priority.

Getting ants in your pants and whinging about your husband's "poor" decisions doesn't engender you any sympathy. It merely makes you look like an immature spoiled brat who feels entitled to what she wants NOW and isn't prepared to endure any delayed gratification while working towards a goal.

Suck it up and be a grownup. Sell the land. Work towards eliminating your debt. And give thanks that you have a roof over your head and don't have to move into your parents basement.


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RE: In IL - rent or short sale, we can't agree, house more than $

I think it makes more sense to stay put and continue paying the mortgage. If you can afford on paper to qualify for this separate construction loan/mortgage now, it sounds like, between the two of you, you can afford to stay where you are. I would sell the land if it has to be built on in that short a period of time. There will be other opportunities in your future to build.


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RE: In IL - rent or short sale, we can't agree, house more than $

Every situation is unique so we can only go on the information you've given. Some people seem to have strong feelings given what they know or have experienced. I wonder how much of it is a difference in generations. Being part of your generation, I understand some of what you're thinking and working with. As we age, it's easy to look back and realize how fast time flies and what little we knew then compared to now.

Ultimately, you and your other half will have to work this out and figure out what's best for you. I'm confident you'll figure out the right thing for you all.


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RE: In IL - rent or short sale, we can't agree, house more than $

As someone upthread mentioned, you can't unilaterally decide to short sale. Short sales require bank approval, and you must prove actual hardship.


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RE: In IL - rent or short sale, we can't agree, house more than $

Cannot give you any advice except for you to get some professional help, either in counseling or legal. You don't seem to want to work with your husband etc and if you were my kids, I would tell you to grow up. I have grandkids your age Just my thoughts as others here have given you some good thoughts.


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RE: In IL - rent or short sale, we can't agree, house more than $

I might think a situation of mine is so complicated, and I'll be torn about what to do. That's because I'm in the thick of it. Strangers can sometimes give the best advice and cut right through the fog.

First of all, putting your problems into perspective might help you feel better and be less stressed. Spend a little time each month volunteering to aid the less fortunate. You'll help both them AND yourself--truly. And do your best not to let money harm your marriage. What's the point of building a nice house on the land if you two drift apart or even divorce because of the financial stress?

Second, when it comes to your financial situation, I think you should sell the land, stay in the townhouse, cut your discretionary spending, and pay your debts down as quickly as reasonably possible.

There's an old saying, "Life is simple. It's just not easy." I need to lose weight, so I need to eat less and exercise more. That's simple--but it's sure not easy! Likewise, I don't want to give you the impression that my advice to you would be easy to follow. In fact, it wouldn't be fun at all, not at first for sure. However, I think if you do follow it, you and your husband will endure a challenge together and come out stronger both financially and emotionally.

Best of luck.


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RE: In IL - rent or short sale, we can't agree, house more than $

I want to reiterate what has been mentioned above. If, and it's a big if, you do manage to negotiate a short sale for your townhouse and then manage to find a buyer, your credit will be adversely affected. You will not be able to get a construction loan or a new mortgage any time soon.

Sell the land and concentrate on paying down your joint debts.


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RE: In IL - rent or short sale, we can't agree, house more than $

I haven't read anything but what is in this thread. But I don't see a generational issue. It seems pretty straightforward to me.

You and your DH have an asset that has time-limited utility and worth to you (the land) and if you get a short-sale - with the resulting hit to your joint credit - you won't be able to get a building loan/mortgage before the deadline. So the obvious thing is to get busy selling the asset, now, before the deadline forces you to accept less for it.

Living in the TH may not be where you want to be, but it may be where you must be for the time being. Since it will provide you with shelter, protect your credit from a hit and be a vehicle (assuming sale of the land) for paying down your debts (what on earth is a jewelry loan?), you should jump on the option.

You made promises of for better and worse when you married, this isn't the "worse", just a smidgeon of "not exactly what you want it to be". Get rid of the land. Hopefully you'll make a little money on it; put that money in your "downpayment on a new place we both will choose" account. Take the money that's going towards the mtg. on the land and pay down your other debts, Then take the money going presently into them and put it into the down-payment account.

Being newly-married is tough enough without a big squabble over money. The idea that you could force your husband to take a credit hit w/o it affecting you both is incorrect (under most middle-income circumstances - and if you were wealthy-enough to have that kind of wholly separated finances this wouldn't be an issue). This is not "his problem" with the TH purchase and "your smarts at owning land". You both have an underwater town home and you both own land that has to be built on before you are likely to be able to recover your credit from a short sale of the TH.

Is there a gov't program that will allow a cram down on the TH mortgage principal, or a renegotiation on the rate re-set?

It's fine that you have taken over day to day financial work within the family, but that does not make you the boss of the family finances. My husband looks after our cars, but I still get to choose what I drive. I do all our the laundry, but he still chooses his clothes. We have been married for more than three decades, so something must be working.

Even if you are much more conscientious and better at getting the bills paid on time, if you throw that in your new husband's face, trouble will come. A good marriage capitalizes on the sum of the added strengths of the couple, and ignores relative differences between them. Your effectiveness at managing money means, that as couple you are effective money handlers. Whatever financial decsions you individually made before marriage should be ignored in discussions of what to do now. What counts is how you face up to and resolve whatever financial issues that happen to you from here on out. You each come in with debts and assets (in both financial, and all other areas, as well), but now they are shared matters. That's the fundamental challenge, and blessing, of marriage

I'll ask one final provocative question: if you sold the land would you personally feel vulnerable economically? Is the land your emotional/financial ace-in-the-hole, just in case you bail out of the marriage? If so, you need to think about what that means for you and your marriage. New marriages often don't feel fully committed, so I'm not saying you shouldn't feel this way. But if you are keeping "double books" in your mind, then you are short-circuiting the process of deepening your marriage.

Wishing you as much satisfaction and happiness as I have had in my long marriage. That's a lot!

L.


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RE: In IL - rent or short sale, we can't agree, house more than $

Illinois being a recourse state, the bank can come after your husband for the difference if he does a short sale/foreclosure. And they can come after him for quite a few years (Eg, in FL, the lender has up to 5 years to file a deficiency judgement, and then up to 20 years to collect the debt). His credit score will plummet as well, as others have pointed out.

If your name was not on the townhouse's mortgage/deed, they go after your husband only. His retirement savings, if in 401K/IRAs are generally protected, but most other assets are fair game. Indeed, it sounds like he has viable assets for the bank to go after, such as the annuity you mentioned or say, garnish his wages. Since you asked about the land specifically - Primary residences are generally protected, just like retirement accounts. I am not sure about land though - if you haven't built it on it and will be living in apartment or with your parents, I will doubt it is considered a primary residence and so can be subject to seizing.

What can he do if the lender does go after him with a deficiency judgement? He can file bankruptcy. Good luck with that.

From all you've said, I won't think doing a short sale/foreclosure so you can build a new house is the right financial move for you at this moment. I definitely think forcing him to declare bankruptcy to save 50-100K that are paper losses at this point is going to strain your marriage.


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RE: In IL - rent or short sale, we can't agree, house more than $

Hi ML,

I think you're getting unfairly beat up. Your guy did the same thing that a lot of people did- they bought at the top of the market, thinking it was a good investment. Right now you have a "paper loss", but there is also the real cost of paying a mortgage for $200k+ vs a mortgage of <$100k. That's the kind of thing that rankles and I don't think it gets consideration all the time.

That said. Truly, this is a "good" problem to have. When you and your DH look back on this years from now, you will think about how you had to deal with a place that is less than perfect and sold some land instead and you'll smile about your youth. You will be thankful that you could afford the mistake and that you weren't bankrupted or foreclosed upon.

This is still a problem, but it's a problem that is livable. You aren't facing cancer, injury, etc. In a few years it might make more sense to rent because rents generally are rising now. In fact, this might eventually turn into a cash cow if you ended up renting it. You might end up making much more money on it then you would have if you could short sell it now- plus there will be costs associated with a short sell, even if it were possible (it sounds like it really isn't.)

This is just the start of the story for you and your DH. Don't let this come between the two of you. There are all kinds of ways to have fun with it and make it a positive. My FIL is a contractor- when the crash started, he reno'd his kitchen and bathroom and took a lot of before/after pics. He started a website for his business with the pics. His wife was delighted to have a new kitchen and bathroom, and he picked up business. Look for the win-win. You're smart and young, it gets better!


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RE: In IL - rent or short sale, we can't agree, house more than $

mojavelove, I get that you're frustrated but you need to come down to reality and look at things logically. It makes no sense right now when you have the debt you have to even think about going in to more debt with a new house. Others here have given you the best advice you can get because they aren't emotionally invested like you are, and that is to sell the land, cut back on expenses and start paying down your debt, that way you will get ahead, instead of further down a hole.

It sounds like you have expectations that just aren't realistic right now, but forget about what you want and focus on what you need instead. Many of us older folks have gone through tough times financially, but you just hunker down and tighten the purse strings and get through it. You don't need a big house on an acre, expensive cars and jewellery to be happy. BTW, was the "jewellery loan" for your engagement ring? People in previous generations have raised large families in tiny homes, it was common when i grew up, without credit cards and cars they couldn't afford, you just learn to make it work with what you have available. If you don't get on the same pragmatic page as your husband then this is just going to cause conflict between you and your husband when you two could just be working together on this and enjoying your marriage.


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RE: In IL - rent or short sale, we can't agree, house more than $

At least your worthless house is nice, but I know exactly how you feel. We're stuck in a house we hate, in a neighborhood we hate, in a state I really, really hate, paying double the going interest rate on a mortgage with a balance of triple the house value.

It really wouldn't burn so much if this wasn't what we were told to do. Don't waste your money on rent, they said, buy. Don't get one of those evil ARMs, they said, get a fixed rate mortgage and you can always refinance, they said. Buy within your means, even if it's less than you want, you can always move up in a few years, they said.

So we did what we were "supposed" to do, but still got screwed out of six figures and stuck with a mortgage without getting the nice cars and lavish vacations and latest tvs and all the good stuff, and now have a house worth 20K because everyone else walked away from their obligations, and because we're responsible enough that real banks want our money, we qualify for absolutely effing nothing (we might be able to refinance to at least get a lower rate).

Costco's magazine does have an article that might help you. They apparently have a mortgage broker that might write for underwater homes. If the link doesn't go immediately there, it's the May 2012 issue, page 89.

Here is a link that might be useful: Mostly an ad for Costco's mortgage people, but it could help.


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RE: In IL - rent or short sale, we can't agree, house more than $

His jewelry loan is a result of the engagement ring...

Did you look into refinancing that ARM with some of the new mortgage products?


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RE: In IL - rent or short sale, we can't agree, house more than $

I suppose the OP is going to not return to address the posts, just like what she did on her other post.


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RE: In IL - rent or short sale, we can't agree, house more than $

I agree NC. I loved her line:

You don't know anything about the land or me and you are making assumptions.

And yet she won't explain what it is that everybody is apparently missing.

I think she just needed to vent. My wife does this all the time. It seems like she's asking for advice but all she wants is for me to listen and say "Yep, that sucks."


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RE: In IL - rent or short sale, we can't agree, house more than $

I guess we can hope that all our posts made her seriously reconsider her perspective on their financial and living situations. She realized her relationship with her husband was way more important than where they lived or what their financial position was. She went to him, apologized for pushing him to do a short sale, they had a good cry together, and then mapped out a solid plan to get rid of all their (non TH) debt in the next 3 years, through selling stuff, cutting lifestyle, and working together.

They're currently living happily ever after. She hasn't been back because she's too busy working on the plan.

That's how I'm going to think of it. :-)


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RE: In IL - rent or short sale, we can't agree, house more than $

Aaahhhh optimists! Sadly, I think the pessimists are going to be nearer the mark on this one. After her first post in March this year that she didn't listen to, she went out in May and bought the land. It wasn't part of the original "my boyfriend is stupid and sucks because he won't walk away from the roof over our head" rant. That's not the actions of someone who wants to actually get out of debt by working hard to eliminate it. It's fantasy thinking.

I really don't know how on earth a bank approved her for the land loan, unless they aren't married yet and she bought it on her own income and credit. With the "jewelry loan" listed as one of the debts, I find that the most likely scenario even though she refers to him as her husband. Perhaps there is still time for her to grow up before that happens, or for him to realize that she puts her wants before their needs as a couple and to put a stop to legally entwining himself any further.

Buying the land was a blatant signal to her boyfriend/husband that she isn't a partner to his debt. That means she's more than halfway out of the relationship. If indeed it was ever an actual relationship and anything more than just a means to move straight out of her parent's house into someone else's house.


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RE: In IL - rent or short sale, we can't agree, house more than $

And her March posting didn't mention his "jewelry loan", which I'm sure was for the rock on her finger.

I only hope that her husbnd cuts her loose before any children are conceived.

Before I knew him, in 06/07 he was making $120k and made a very poor decision to buy a $215k town-home with all of the upgrades before he saved up

I'm sure that if she were with him at the time, she would have thought this was a great decision - "Look- my man is so responsible, he is a home owner."

There were many smart people who made "poor decisions" in 2006. Hindsight is 20/20.


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RE: In IL - rent or short sale, we can't agree, house more than $

If MojaveLove is worrying herself sick about finances, I do hope she takes a deep breath and calmly reads through these posts. It won't be fun, but a lot of good advice is here.


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