Casualties of the housing market

posted by Jeff | Saturday, July 18, 2009, 1:09 AM | comments: 0

We got the news that we pretty much expected from a new Realtor regarding Diana's house. Best case scenario is that we'll probably have to take a bath on it, somewhere in the amount of $20,000, if we want to get rid of it. That's what we get as responsible credit users in a market where banks would lend to anyone and morons would buy more house than they can afford.

So where does that leave us? Well, if we can contain the loss to $20k, we may have some options. The first is to see what we can do to refinance my house, and disturb the equity I have. I need to refinance anyway, because when I did it in 2006 around the divorce, I settled for a no-closing cost loan at a higher rate. It made sense provided I sold the house within four years (i.e., closing costs divided by 48 were the difference between higher rate payments and normal rate payments at the time).

The question becomes, what kind of risk are they willing to accept? Houses around me aren't taking as much of a ding in value as other places, but I'm realistically looking at only $30k in equity given sale prices of my neighbors. That's $10k lower than a year ago. By the lower estimate, that puts me right in the 85% loan-to-value ratio. I doubt anyone is going to loan us money for that. It all comes down to what the bank thinks my house is worth.

So if that route fails, believe it or not, we can draw up a bunch of cash in a hurry by way of the most evil form of lending, credit cards. I can stick about $12k there at 0% with a 3% fee for a year (rate after that is 7.49%). That much would be pretty easy, and Diana could easily pay that portion off in a year because it's around what her current payment plus utilities and her now paid-off second mortgage was.

Beyond that $12k, I'm not entirely sure. The big variables are what the sale price of her house would be, how much cash we could stock pile between now and then and what I'm doing for work. If I can find a gig soon, I could probably sock away $10k in three or four months. I've done it before. I think it's all of those variables combined that stress out Diana the most.

And make no mistake about it, she's stressed. Her first feelings are of guilt, that I have to get involved in her real estate debt. First off, she didn't know assholes in her neighborhood would have foreclosures selling for $20k, and second, you don't marry for mortgage scenarios, you do it for love! I'm OK with all of this.

The other feeling she has is that we're trapped in Northeast Ohio, not just because of her house, but potentially for difficulty in selling mine. I believe that there are two ways to spin this positively. The first is that all of this is little more than a setback. Assuming that I get to work again soon, or sell another domain name for top dollar (lightning twice?), we'll stockpile cash and build toward living where ever we want. The second spin is that what you lose on the sale, you might be able to make up for on the purchase. Shit is on sale all over the place, and it won't be down forever.

So yes, the situation is shitty, but it's not hopeless, no one is going bankrupt and we're still eating well and healthy. We'll roll with it and deal.


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