How to get out of house quickly

[Sam_2.0]

...

[Sam_2.0]

Please excuse the first post. I can only start threads from my phone (weird, huh?).

DH and I want to sell our house. Yesterday. I want to realistically look at what our options are.

Financial details: Mortgage $86,000 still owed. Zillow estimate on house $80,000. House price has dropped from $105,000 to $80,000 in the six years we have been there, so we are upside down now.

Reasons to move: 1) Very unsafe neighborhood. Our house was broken into once, and my sister (down the street) has been broken into three times just in the last year (the most recent happened while they were home - she was sleeping on the couch with her baby when someone forced their way in. Luckily her DH was home & scared them off). A few blocks away, people broke in & killed all the residents shortly before Christmas. Shootings, rapes, etc. The neighborhood was NOT like this when we moved in!!! We checked out the crime stats, talked to neighbors, etc before we bought the house. It has gone downhill, and FAST.

2) We are having a baby in July. I don't feel safe having her there, and frequently wake up with nightmares & panic attacks about someone being in our home. And its definitely not the type of neighborhood environment that we want to raise her in.

3) We were trying to wait it out hoping we could pay off more of the mortgage & not be upside down, but our house has dropped another $5k in the last 6 months (just going off the Zillow estimates). If we keep waiting, we won't ever recover the price.

So....how do you sell a house for less than the mortgage? We don't have enough cash to bring to the table, but at this point I am not above getting a personal loan from the bank or asking my dad to help us (I am sure he would - but borrowing $$ from family gets messy). We would rent in the area of town where we want to live for a few years until we got a DP for a new house.

And...how do you sell a house quickly? If this could be done tomorrow I would pack everything up & never look back. For the most part our house is in good shape. There are a couple of things that need done (paint touchup, new showerhead in 2nd bedroom, etc). Things that would take a weekend to fix.

[Wisconsin Beth]

And dig up recent sales figures for comparable houses in your neighborhood. I won't use Zillow. Around here, it's just not accurate enough.

[Sam_2.0]

The problem is that we don't have a lot of recent sales, mainly foreclosure deals. For like $30 or $40k.

I am not too attached to any kind of price. But how do you get a $20k loan to pay off the rest of the mortgage (if that's what we end up needing)? Would the mortgage company work with you on that, or would it be considered a short-sale?

[rmtvbrooks]

I don't have a lot to tell you about mortgages, but I can tell you about borrowing from family. I have been dealing with a situation of terrible finances thanks to the financial idiot I was married to. I found out in September that he was abusing our daughter, and two weeks ago he committed suicide. I was left with a crappy credit rating and no money in the bank. We were renting our house. I found a job near my parents, but my credit was so trashed that I couldn't even rent an apartment without a co-signer. My dad offered to buy a place and let me rent-to-own. He did a cash-back refinance loan on their paid-for home. We set up everything in writing, for his protection and mine. We completely trust each other, but this way there are no misunderstandings later on. I also purchased life insurance on me and named him the beneficiary. That way if something happened to me, he'd have enough to pay off the mortgage and have some left over to help care for my kids. Borrowing from family is only messy if the terms are not clearly defined and understood. If your dad is willing to help out, accept his help, but only on the condition that everything be in writing--how much he is loaning, what the repayment terms are, etc. You could even have an attorney look it over to be sure you are both covered.

[Wisconsin Beth]

I think the foreclosures are going to hurt your home price too Sam. Because if someone can buy a decent house in your neighborhood for $40K, why would they pay $80K for yours?

As for short sales, you'd probably be better off posting on the main board about it or asking a mod to move this thread there. I think you have to work with the bank on it. If you only have 1 bank, it's easier to deal with than if you have a Home Equity Loan or Line of Credit with a different bank.

[nasagreen]

sometimes you can talk to the bank beforehand about what they would do for you and what interest rate you would get if you tried to convert a shortcoming from a mortgage into a loan from the bank. heck , the bank would be getting all their money back so i believe they would rather do that then start a short sale. my friend was looking into this and they offered a pretty reasonable conversion loan from the mortgage shortfall.

[Sam_2.0]

Good idea, Nasa. I will try that. I would rather pay off a $40k loan than stay any longer. Not sure if DH is up for taking on that much debt....

[dragon2008]

I'm so sorry to hear about the problems - the one place you should be safe is in your home.

Talk to a realtor about what the action is in your neighborhood and a potential price. You don't have to sign up with one to get that info. It sounds like the price will be much lower than your current estimate of $80K if the neighborhood is that bad. Since it looks like things are going to worse instead of better, you should move quickly to get into the market.

[spruby]

A couple of things - I had to sell a house quickly (list/move/close <30 days).

1) Get a real estate agent - not your friend or your parents friend - the very best one you can - someone who is busy, knows the area, motivated to make the sale. Now is not the time to worry about the cheapest. Find out how much they think you should list at to get attention and get it sold. Zillow just isn't meaningful

2) Get rid of stuff - everything - rent a storeroom, put in the garage, your parents - just out! Each room should have nice furniture so people can imagine how the room will be used but nothing over the top, not too much stuff. Clean and bland. If you have a purple wall or blue kitchen - paint them neutral.

3) Clean - everything - top of ceiling fan blades and curtain rods, baseboards, use white erasers on the walls.

4) Figure out how to cover the difference between #1 after all costs and your mortgage. Ask the bank for a personal loan, ask your folks, ask DH's folks (paper everything with family), ask your regular bank, put together the best way - first $5K from bank 1, next $5k from savings, next $10 from your parents, if more needed - up to x from his parents - this is just an example - but play with your options.

5) Decide how far you are willing to go if it doesn't sell. Move and rent and do what with the house? Hire a management company to rent it out and you cover the shortfall? Turn the keys into the bank and abandon it (what happens if they come after you). You move in with folks DH stays at house? Raffle the house off? Come up with every possible option - the pros/cons and discards the ones that you can't live with. Everyone has different standards - only you know yours.

BTW - do you have a military base around you? Spring/summer is moving season - families are looking for houses - figure out the housing allowance for your area - there is a website for people willing to rent to military, list the house there.

Good luck

Good luck

[Sam_2.0]

Good ideas, spruby. Thanks

FIL told us about another option too - trading our house as part of a purchase on one in the area we want to move to. There are a bunch of new neighborhoods with brand new empty houses out in the suburbs. FIL said he has traded houses before, and a guy DH works with just did a trade in the neighborhood we are looking to go to (so we know the builder is up for the idea).

We are contacting a realtor to see what our realistic price is on the current house, get the avg time on the market, all that jazz. The good thing about this house being worth so little is that we are looking at $20k-ish to get out, vs. $100k+. Guess that's an upside to buying a tiny "starter" home

[regina24601]

sam - I <heart> the realtor we used when we bought our house nearly 2 years ago. If your current realtor falls through for any reason, let me know and I'll be happy to pass her name on to you. Other than that, I don't have any advice, but you do what you gotta do! Momma bears get super protective of their young, so my guess is your current feelings about the house will only intensify once Alyvia gets here. Good luck!

[DVM gone riding]

I bought a house that the people owed an extra 20k on. their bank eventually gave them a personal loan. Your bank with the mortgage would rather lock you into that then risk you just foreclosing. Though the trade idea sounds great I don't understand why ANYONE would want to live in the neighborhood you are describing.

[Sam_2.0]

DMV - the trade we are looking at doing would be with a builder. Its not a trade where they come live in our house. Basically we would offer our house as part of the deal (on a $200k house we would offer ours at $86k + $114 financed), and then the builder would sell it off again once we closed. They would never even set foot in the house, most likely, just get their realtor to it quickly for whatever they can get out of it. Turns out several builders in the area are up for this right now to get rid of houses they have been sitting on for 18+ months. And that way we don't need to hassle with trying to sell

We looked this weekend to find the neighborhoods we like. And to get a good idea of the price ranges, condition of the houses, feel of the neighborhoods, etc. Right now our plan is to wait until a great deal comes along, and then be ready to move quickly. We are going through things at our house to get rid of what we don't want/need, putting things in storage at my parents that we won't need to get to for awhile, and saving up $$ like crazy. We are hoping to get a good deal in the next 3-6 months.

[chicg]

Sam, it might be worth seeing which builders will consider the trade and for what price now, rather then waiting until you find a house you like. You don't want to find a house, then the builder doesn't accept this deal. This sounds like an awesome plan if it all works out, but the builder might not be willing to offer the same for your house as the realtor says it can list for so I'd get prices from each.
Also, if you find a new construction house that's been sitting vacant for a year, make sure to have a good inspection done and look for mold. In the KC climate with the hot/cold fluctuations, if HVAC wasn't regularly operated, the home could have some funky mold growth going on.

[qofcc]

Also check to see what rentals are going for in your neighborhood. You can call your local HUD office to find out the Section 8 payment standards for your county.

[Plain Old Petunia]

"Basically we would offer our house as part of the deal (on a $200k house we would offer ours at $86k + $114 financed), and then the builder would sell it off again once we closed."

Are you sure about this? This would mean the builder is swapping their brand new house for your current house in a bad neighborhood and 28k in cash. This doesn't seem to add up.

[Sam_2.0]

Yeah, then the builder would just sell our house. They wouldn't really be taking a hit on the new house, they would be taking it on ours, since it would sell for less than what we traded it for. Its worth a shot at least

[Plain Old Petunia]

Certainly it is worth a shot, all they can say is no.

[Plain Old Petunia]

And Sam, I would absolutely not stay in a neighborhood where safety was a very real concern.

What do your sister and her husband plan to do? Maybe you could do something together, like buy a two family house or a piece of property, or something.

[chicg]

hey Sam - don't forget to make sure you'll qualify for financing. If the builder doesn't count the equity from your current house towards a down payment, you might need to bring cash to the table. They also might not accept your fully appraised value. Just get the financial details figured out so you're prepared with what you'll need to bring to the table, what your new mortgage might look like, etc.

I've never heard of this kind of deal, i'm interested to see how it plays out.

[seriousthistime]

Mar 30, 2011 11:12:50 GMT -5 Sam_2.0 said:

Yeah, then the builder would just sell our house. They wouldn't really be taking a hit on the new house, they would be taking it on ours, since it would sell for less than what we traded it for. Its worth a shot at least

I'd be interested to see if this works. I suspect that builders, being businessmen/women, are not going to want to take a hit on either end. Even if the builder has cash lying around so that he can pay the bank whatever he owes when the bank financed the construction of the house you want to buy, the builder's going to want to know what he can sell your house for, now. Many builders are not that flush with cash and they leverage as much as they can on each spec house so they can keep the momentum going. They can't just say to the bank, here's 114K I just got from Mr. and Mrs. Sam, and I'll pay you the other 86K when I sell their house. I suppose that if new houses are not moving, whatever negotiation room you might have due to a slow market will evaporate if there's a trade for a house in a declining neighborhood. However, every builder and every market is different, so you don't know unless you try.

[Plain Old Petunia]

It seems to me that the builder would be losing money on both ends.

[debinwa]

When you trade a builder for a house plus cash, there has to be equity in the house, but you don't have any. For trade purposes, your house is worthless. The bank could trade the house to someone, but you couldn't. Who would pay the bank the 80K they are due?

[spruby]

I would expect it works the same way as "trading in" a car where you owe more than the note - the negative equity gets added on. Or you lose some/all of any equity you have. If the builder gets your house cheap enough they can make money.

sam - have you and DH checked with the builder

[Sam_2.0]

The builder's listings said they are open to trades, and one of DH's co-workers just traded on a house in the same subdivision with the same builder. We have not gone in with an offer yet - trying to get everything all lined up first (financing approval, down payment, closing costs) so that we are prepared to move quickly if they do say yes. Maybe in a month or two.

[Plain Old Petunia]

Mar 31, 2011 19:01:09 GMT -5 spruby said:

I would expect it works the same way as "trading in" a car where you owe more than the note - the negative equity gets added on. Or you lose some/all of any equity you have. If the builder gets your house cheap enough they can make money.

sam - have you and DH checked with the builder

True, but that's a car. They'll let you drive off the lot owing more than 100% of the value of the new car. The new mortgage can't be for more than 100% of the value of the new house.

[Plain Old Petunia]

Mar 31, 2011 19:09:47 GMT -5 Sam_2.0 said:

The builder's listings said they are open to trades, and one of DH's co-workers just traded on a house in the same subdivision with the same builder. We have not gone in with an offer yet - trying to get everything all lined up first (financing approval, down payment, closing costs) so that we are prepared to move quickly if they do say yes. Maybe in a month or two.

Sam, I am not trying to discourage you, though I am certain it probably seems that way. I think it could work, just not with the numbers you mentioned previously. I do realize you were just tossing out some numbers off the top of your head. If I'm being too literal, I am sorry.

You are wise to get your ducks in a row first. Best of luck to you. If this particular builder/house don't work out, then something else will.

[spruby]

petunia - you are right - much harder (impossible?) to get mortgages above 100% these days (you used to be able to get up to 125% - yuck) - but I don't know that sam/others need that. what the house trade in gets you is liquidity (assuming you have some equity that the builder doesn't eat to do the deal) or simply removes the illiquid situation - an example because I don't sound clear to myself:

Made up numbers - example 1

Owe 80k
Estimate sale proceeds after all costs 85k
Time to generate sale proceeds - 9 months to 2 years

Have 10k on hand

trade house for -0- credit on new house price
use 10k for down payment/closing costs
the deal costs you 5k to get out quickly - only you know if it is worth it

example 2

Owe 80k
Estimate sale proceeds after all costs 75k
you would need to bring 5k to the table
Time to generate sale proceeds - 9 months to 2 years

Have 10k on hand

trade house for -0- credit on new house price
new house costs 10k more than expected/identical house*
use 10k for down payment/closing costs
the deal costs you 10k (more expensive house) to get out quickly - only you know if it is worth it

*since houses aren't identical - builder steers you towards more "expensive" home - their cost is % of the selling price - depending on when land was bought - (and area) - developer is usually aiming for 35-45% IRR on development (this is a big developer number - local guys/individuals - different numbers) - if you didn't have to trade in the house they would sell it you a little cheaper (unless they can avoid that) - but they take the house - they increase your price

builders live in a world of creative financing - the ones still in business have cushions built into their sale prices to make these deals happen

sam - if you know you can resist the sales pitch - I *really* recommend you & DH go talk to the builder(s) NOW before you do a lot of work on lining everything up so you know if the ducks you are lining up are the right ones. It would be horrible to do a ton of work, go to do a deal, and find it isn't possible. It may be easier/harder than you think

[8 Bit WWBG]

...:::"I think the foreclosures are going to hurt your home price too Sam. Because if someone can buy a decent house in your neighborhood for $40K, why would they pay $80K for yours?":::...

Because for the foreclosure or short sale, the bank will drag its feet for 10 weeks, lose your paperwork twice, and then threaten to pull out in the end unless you come to the table with extra cash. By comparison, the OP could accept the offer on the spot, and close with no games in under a month.

That trading thing sounds interesting. It sounds like it depends on what it cost the builder to build, vs what the market value is. Given some of the quick slap jobs on the market today, I could totally see it costing under $100k to build a house they can sell for $200k. So if you finance $120k, and give them your $80k house, then the builder could still come out ahead even if your house sells for 0.