Why did I buy a house in 2006? Am I a complete and total idiot?

The value of his condo will decrease and/or remain flat for a long time. Developers went on condo-building sprees all throughout Florida. There's such a ridiculous glut of inventory it's almost laughable. Many of these new developments will convert from condos to apartments in the near future, killing his "investment" even more. Prices for condos in Florida will not rise in 2-3 years. They will fall even farther. This guy is screwed.

To the OP, you should visit a real estate lawyer and go over all of your options. Financially, letting the house go may be your best option even if you can afford to make the payments. Even though you will have a foreclosure on your records, you already have a house to live in and a wife that can get some credit if needed. If you can save that 10k instead of putting it into a poor investment, you may be hundreds of thousands of dollars ahead when you retire.

I ran the numbers. If you put 780 per month in a savings at 5% for the next 7 years (the amount of time a foreclosure is on your record) and then let it sit there for 23 years without putting in anything else you will have $241,368 in 30 years when you are able to retire.

If you keep the house for 7 years, you will still have not paid any on the principal of the mortgage, you won't have any money in your savings and the house will most likely still not be worth close to what you paid for it. That is assuming you can keep the house rented and the renter makes their payment to you.

The lawyer will instruct you how doing that will affect your taxes, credit rating, and any other costs associated with going through a foreclosure.

The midwest has already peaked in foreclosures and is now trending downward. The reason behind this is that most of the foreclosures are from subprime mortgages.

The Coasts are now getting hit the hardest because most of the foreclosures are investors speculating and more affluent buyers who were able to hang on longer before throwing in the towel.

The midwest will recover much faster because the rate of appreciation was far less than the coasts. The value lost has only been about 10% for ready to move in houses. The value on the coasts may go down 30-40%.

Thank you all for your thoughts on this. Before starting this thread, lots of my friends and neighbors had been recommending I foreclose, and my response was always "I would never do that. I can afford the payments and I'm not looking for the easy way out." But you know what? When I see my government bailing out these fiscally irresponsible corporations and banks (the very ones to which I am paying hundreds of thousands of dollars in interest), it makes me wonder, "why should I suffer when the very people who helped create this mess think they can re-define the rules for themselves?" This environment can cause otherwise responsible people to decide to become flakes, since obviously the flakes are the ones being rewarded.

Make whatever decision that you feel is best and can live with.

If you decide to stop making the mortgage payments, please let the renter know in advance of them being evicted by the bank so they can have time to make a decision on their life.

Once the foreclosure notice goes up, a renter would have roughly 60 days to get out. I know because I've been through this as a renter.

A renter might even try talking to the new owner. Even a bank might be willing to have him live there (possibly for rent free) to prevent squatters from moving in.

I bought a house in 2005 for $360,000. But I sold a house then too and sold it 45 days after my mortage started on the new one so I don't feel too bad. I got a 30 year fixed at 5.25% and with money my wife and I had saved along with what we had to pay off/what we made on the old house after upgrading it we only had to take out a $200,000 loan.

With a little research and self-education there is not a lot that the average real-estate agent cannot tell you that you could not find out on your own.

Never forget this - Real estate agents thrive off of commissions and are in the business of moving houses while trying to make sure that they can convince buyers and sellers to be happy with their decisions.

However, there are some really sleazy and unscrupulous agents out there.

toro wrote:

The "lucky" part had to do with buying in 1999 as opposed to not buying in 2006.

And I stressed he could not buy in 2006 with a normal mortgage as you did not.

There are many benefits to owning a home if you were "lucky" enough to be able to buy when the prices were reasonable.

If the market is such that a reasonable loan is not attainable, then you DON'T BUY then. Just because someone wants a house doesn't mean they get to buy one. Again, NOTHING lucky about it. I've made financial decisions based on market conditions and my stage in life. Didn't buy a house until age 33 as a result. I waited for the right time. It's NOT luck brother.

toro wrote:

Make whatever decision that you feel is best and can live with.

If you decide to stop making the mortgage payments, please let the renter know in advance of them being evicted by the bank so they can have time to make a decision on their life.

Don't worry I would never screw over a tenant like that.

My plan is to keep the place and weather the storm. Remember I put 20% down, so my mortgage is only $188,000, which is 3x my annual after-tax salary. Perhaps once the market truly bottoms and people start buying again (when inventory thins), I will be able to get $188,000 for it. I'm going to wait and see, and in the meantime, eat lots of Ramen noodles to save money.

Blowing Rock Master wrote:

Once the foreclosure notice goes up, a renter would have roughly 60 days to get out. I know because I've been through this as a renter.

A renter might even try talking to the new owner. Even a bank might be willing to have him live there (possibly for rent free) to prevent squatters from moving in.

This is governed by state a local rules and is not a national standard.

I know that, but the renter won't have the sheriff show up with no warning and throw him out either. 60 days is a rough estimate, some places will be 30 while other places will be longer. There's discussion now of making a federal law that requires new owners resulting from foreclosure to honor existing leases.

Why Oh Why? wrote:When I see my government bailing out these fiscally irresponsible corporations and banks (the very ones to which I am paying hundreds of thousands of dollars in interest), it makes me wonder, "why should I suffer when the very people who helped create this mess think they can re-define the rules for themselves?" This environment can cause otherwise responsible people to decide to become flakes, since obviously the flakes are the ones being rewarded.

Ultimately, I think this is and should be a financial decision more than an ethical one, but let's keep it real. You are very much "the people who helped create this mess." You bought an overvalued house with the belief that there was no significant risk in doing it, and now you are considering breaching your contract with the bank.

I do think banks and brokers have been almost criminally irresponsible in allowing people *not* like you -- those who *could not* afford their loans -- to take on enormous risk. But those borrowers were often too unsophisticated to know better, and then they didn't have a choice in the end.

You have a choice but may walk away out of greed. (As I said, I don't want to be holier-than-thou . . . just pointing out that while there are many blameless victims, you are slipping far toward the other end of the spectrum.)

Blowing Rock Master wrote:

60 days is a rough estimate, some places will be 30 while other places will be longer.

You seem to make a lot of very rough estimates. It's almost as if you don't have a fvcking clue what you're talking about.

Flagpole wrote:

If the market is such that a reasonable loan is not attainable, then you DON'T BUY then. Just because someone wants a house doesn't mean they get to buy one.

I think your perspective on housing and finance can be conservative to the point of being simplistic, but I agree with this.

The truly lucky are lucky enough to be smart . . . and smart enough to *protect* the windfalls that occasionally come from calculated risks.

Dude,

Stop feeling sorry for yourself and join the club. Just do what I'm doing, keep paying it down, if you need to move rent it out, whatever you do, don't sell. We'll get through this, now let's all hold hands and sing Cumbaya.

momoneymoproblems wrote:

Yep you're an idiot. 20% down on a 10yr interest only loan when rates for a 30yr fixed weren't much higher.

Way to through money away.

Weigh too throw spelling aweigh.

I don't know much about finance, but 'webby' is my new favorite poster...

webby wrote:

You are very much "the people who helped create this mess." You bought an overvalued house with the belief that there was no significant risk in doing it, and now you are considering breaching your contract with the bank...You have a choice but may walk away out of greed.

I'm not really considering foreclosure, although lots of people have recommended it. I'm just venting.

We only know the house was overvalued with the benefit of hindsight. In '06, I had a suspicion there was a bubble, but comparables were selling for $20,000-$30,000 more. So did I pay too much? Not for '06. I paid too much for what the price should have been had it followed a normal real estate appreciation trendline over the last decade.

I was a legitimate home buyer seeking to live in the home. I wasn't a flipper, I wasn't an investor, and I wasn't looking to make a quick buck. My goal was threefold: 1) I needed a place to live 2) wanted to protect $60,000 and 3) wanted to send my kid to a good school. I think it's a big stretch to say I'm greedy and culpable in causing this mess. But think what you want.

No one forced you to buy an overvalued house. It doesn't matter what the comparable prices were...if you did your due diligence and looked at the historical numbers (like I did), it would have been obvious that it was a bad idea to buy.1) You could've rented2) You could've put your $60,000 in a CD3) You could've rented in a good school district

Why Oh Why? wrote:

We only know the house was overvalued with the benefit of hindsight. In '06, I had a suspicion there was a bubble, but comparables were selling for $20,000-$30,000 more. So did I pay too much? Not for '06. I paid too much for what the price should have been had it followed a normal real estate appreciation trendline over the last decade.

I was a legitimate home buyer seeking to live in the home. I wasn't a flipper, I wasn't an investor, and I wasn't looking to make a quick buck. My goal was threefold: 1) I needed a place to live 2) wanted to protect $60,000 and 3) wanted to send my kid to a good school. I think it's a big stretch to say I'm greedy and culpable in causing this mess. But think what you want.