Is walking away from our house a good idea?

[horse]

During our 341 hearing the Trustee asked us why don't we just walk away from our house and write off the loss of money in the BK. I had no idea what she was talking about and really still don't. Has anyone done this and is it a smart thing to do financially? Our house is probably worth $150000 but we owe close to $180000 on the mortgage.

[blessed]

You're that far into this process and didn't know you can walk away from your house? I'm sorry but your attorney isn't doing his/her job.

As long as you don't sign a reaffirmation agreement with the mortgage company you can walk away because the bk removes your responsibility to pay. If you want to continue to live there you obviously must make the payments on time.

[nc73]

Yup you've got to research these things. Lawyers will usually only answer questions you ask them. Most don't offer anything else. Yes it is a smart thing to do if your house is 30k under water.

[Brazzy]

I really dont understand why people on this site are so for bailing on real estate. Maybe its just me because I live in New England, but most of the people here made 30 year investments on a home. Kind of odd that one down turn and everyone hops off the band wagon. At this point in time its not like renting is any cheaper or more convenient, and its not likely that future home loans will be given away as easily as they were in the past. If you can comfortably afford the payments and have sentimental value in your home then go for it. You have no obligation one way or the other. Im just saying its odd that people make a 30 year investment, something bad happens and their response is that its not going to rebound in the next 3-5 years so screw it. I'm not mocking anyone in particular it just seems that people are awful quick to suggest that other people bail on their homes without really knowing much more about the situation. Everyone is upside down on their homes except for anyone with grandparents still alive who bought their home in 1945 when your grand pappy came home from the war and they bought the house for $6k.

I mean holy shit! Some positive words from the creditor? I know things seem shitty and they seem that they will be shitty for a long time. I mean there is little to no light at the end of the tunnel, but things will get better. I personally do not want to be the one 25 years wishing I had kept my house cuz I would have had it paid off and ironically enough we'll probably be in the middle of a housing boom. Just our luck I guess. I mean there is a demand for me right now, but I hope that the market forces me to adapt and move into a new field. For everyone's sake I hope... no I know eventually it will get better. Just got to suck it up and do what we gotta do for now.

[shark66]

For once I'll agree with Brazzy...

A house - if you consider yours a home - is a lot more than just a dollar figure...

Weigh your options carefully before you decide to walk away.

Good luck.

[nc73]

Give me a break. Sure you could keep it. Go ahead. Suppose you couldn't afford the payments anymore and maybe need to sell it because you need to move. Oooooooooops it's worth nothing and you owe everything. Keep this a business decision and you won't regret it. Don't rely on "things will get better" Play it safe, things may NOT get better. Point is you're already filing, might as well get a fresh start.

[Brazzy]

No one said to reaffirm. Just keep making payments and if you do run into an issue than you can walk away. Whats wrong with that?

[momofthree]

Being underwater by $30k actually isn't that bad. Many are upside-down by 100s of thousands, and for them, the choice is fairly obvious, especially if they can't afford the payment.

If you're $30k underwater & can afford the payment, and WANT to keep your home, then keep it, just don't reaffirm. Like Brazzy stated, you can always walk away later down the line if your circumstances change. Once the house has been included in bk and NOT reaffirmed, then they can't come after you for a deficiency balance at any point in the future.

[blockhead]

Being underwater by $30k actually isn't that bad. Many are upside-down by 100s of thousands, and for them, the choice is fairly obvious, especially if they can't afford the payment.

If you're $30k underwater & can afford the payment, and WANT to keep your home, then keep it, just don't reaffirm. Like Brazzy stated, you can always walk away later down the line if your circumstances change. Once the house has been included in bk and NOT reaffirmed, then they can't come after you for a deficiency balance at any point in the future.

I agree. If you can afford the payments, keep it without reaffirming.

[HHM]

I really dont understand why people on this site are so for bailing on real estate. Maybe its just me because I live in New England, but most of the people here made 30 year investments on a home. Kind of odd that one down turn and everyone hops off the band wagon. At this point in time its not like renting is any cheaper or more convenient, and its not likely that future home loans will be given away as easily as they were in the past. If you can comfortably afford the payments and have sentimental value in your home then go for it. You have no obligation one way or the other. Im just saying its odd that people make a 30 year investment, something bad happens and their response is that its not going to rebound in the next 3-5 years so screw it. I'm not mocking anyone in particular it just seems that people are awful quick to suggest that other people bail on their homes without really knowing much more about the situation. Everyone is upside down on their homes except for anyone with grandparents still alive who bought their home in 1945 when your grand pappy came home from the war and they bought the house for $6k.

I mean holy shit! Some positive words from the creditor? I know things seem shitty and they seem that they will be shitty for a long time. I mean there is little to no light at the end of the tunnel, but things will get better. I personally do not want to be the one 25 years wishing I had kept my house cuz I would have had it paid off and ironically enough we'll probably be in the middle of a housing boom. Just our luck I guess. I mean there is a demand for me right now, but I hope that the market forces me to adapt and move into a new field. For everyone's sake I hope... no I know eventually it will get better. Just got to suck it up and do what we gotta do for now.

Screw that, that is the worst thing you can do.

In most areas, especially the hardest hit areas, prices are stagnate and will be for many years. It makes NO SENSE to try and dig out of negative equity, in many places, that will take 10+ years to do so. Most people who are 15% or more upside will be better off walking and buying again in 3 years, they can probably buy their same house for what is forecloses at today.

It is a business decision.

[aaskybabe]

I really dont understand why people on this site are so for bailing on real estate. Maybe its just me because I live in New England, but most of the people here made 30 year investments on a home. Kind of odd that one down turn and everyone hops off the band wagon. At this point in time its not like renting is any cheaper or more convenient, and its not likely that future home loans will be given away as easily as they were in the past. If you can comfortably afford the payments and have sentimental value in your home then go for it. You have no obligation one way or the other. Im just saying its odd that people make a 30 year investment, something bad happens and their response is that its not going to rebound in the next 3-5 years so screw it. I'm not mocking anyone in particular it just seems that people are awful quick to suggest that other people bail on their homes without really knowing much more about the situation. Everyone is upside down on their homes except for anyone with grandparents still alive who bought their home in 1945 when your grand pappy came home from the war and they bought the house for $6k.

I mean holy shit! Some positive words from the creditor? I know things seem shitty and they seem that they will be shitty for a long time. I mean there is little to no light at the end of the tunnel, but things will get better. I personally do not want to be the one 25 years wishing I had kept my house cuz I would have had it paid off and ironically enough we'll probably be in the middle of a housing boom. Just our luck I guess. I mean there is a demand for me right now, but I hope that the market forces me to adapt and move into a new field. For everyone's sake I hope... no I know eventually it will get better. Just got to suck it up and do what we gotta do for now.

You obviously still have a job and are able to continue to live in your house.

Good for you but not everyone is able to say in the same area and keep a job. Some of us have to move to get/keep a job and guess what?? Now I can't sell my house because property values are half what I paid for it 2 years ago. And renting it is not an option because the mortgage requires it to be my primary residence.

Many people are in the same situation as I and would be thrilled to actually be able to sell the house with only a small loss. But if find a job out of your current area, moving is the only choice. And selling a house now is IMPOSSIBLE.

[Brazzy]

I never took the option of walking away off the table. Not reaffirming still leaves you that option. As for it being a business decision? You mean like an investment? You yourself used the term of 10 years. Real estate is not meant to be a short term investment. Now I'm gonna use a overly simple example but bear with me. Lets say you are only 5 years into your current mortgage. 10 years from now you yourself predict a revound of the housing market. That means you will be 15 years into your mortgage. If you combine you paying down your mortgage for 10 years with a rebound of the home's value you have equity! If you were thinking that short term to begin with maybe renting was the better choice.

Now Im not going to say that everyone should keep their house. I think it is a case by case situation and its not ONLY a business decision. It is a life decision, it is a personal decision. Homes tend to have sentimental value. I simply feel that it should be taken on a case by case basis. A lot of people here tend to jump to the conclusion of surrenderring the house based on little to no information provided. I simply do not think it is that simple.

[DeadManCrawling]

There are good points here from several people, and I think one of the best is:

Each situation IS different. Some people should walk, some should not.

The OP has a home that is underwater by 30k. The question, really, is not how FAR underwater, but what the costs would be to getting another equivalent home in the future, and the difference between rent and mortgage. If the rent price, locally, is higher than the mortgage-for an equivalent house-you should probably stay, but not reaffirm. If you do NOT reaffirm, you can always walk later if it becomes necessary.

The question can be expanded: There are also factors like maintenance, taxes, insurance. Those need to be calculated as well.

Now, even if someone DOES walk, and CAN get the same house for cheaper in the future, I suggest that is not always the best route. For instance, future lenders will likely require much larger downpayments. That is good all around, I think, but may not be as easy to accomplish for future borrowers. There are also closing costs to think of, that add zero equity and simply burn cash at the closing table.

30k, as far as being underwater, is a fairly small amount. Even if the market takes ten years to recover, these other costs above, sentimental value, the local cost of equivalent rent, could end up pointing to keeping the house as a better choice.

That is certainly not the case for most, or possibly many, people. For us, our house is worth 180k at most, and has a 500k mortgage. That is a no-brainer, we walked.

For a smaller number like 30k, I think you need to closely consider other factors.

In no case would I reaffirm an underwater home, though.

[keepinitreal]

Screw that, that is the worst thing you can do.

In most areas, especially the hardest hit areas, prices are stagnate and will be for many years. It makes NO SENSE to try and dig out of negative equity, in many places, that will take 10+ years to do so. Most people who are 15% or more upside will be better off walking and buying again in 3 years, they can probably buy their same house for what is forecloses at today.

It is a business decision.

Especially if you live in one of these areas: http://www.bkforum.com/showthread.php?t=57182

[lolie]

We are actually surrendering our home in our Chapter 7, (unless the bank just forecloses instead). We put it out there for the bank to accept or not. However, we are 250K underwater purely because of economy. We bought our home before the big boom in the housing market and are now suffering the loss because of short sales and foreclosures in our neighborhood. We were never late on payments until we filed for BK because we were still struggling with the idea of giving up homeownership... crazy right?

Not really... walking away from your home is a BIG decision. The only advice I can give is to take away all emotions and look at it from a business standpoint. If this were a business, would it be smarter to cut your loss or keep it? Plain and simple... and it really is that simple.

We are 250K under... ours was extremely simple. 30K under? Not so sure. That really depends on where you live and how much you make. Is this where you planned to be 30 years from now? Was this your ultimate retirement home? Or did you plan on moving in 5 to 10 years into a different neighborhood? Is your mortgage payment comparable to what you would be paying for rent? Is it actually lower? Those are the kinds of questions you need to ask.

Definitely way your options? My decision still wasn't easy, even though we are 250K under, but it was definitely clear. We would be stupid not to walk away. It's still not easy. Now it's just a waiting game on the lender and whatever they decide. We could be moving 3 months from now or a year from now, it all depends on them now.

For all those that think it's a no brainer, you're right, however there are always other factors to look at. And like I said before, it may be clear what to do, but that doesn't mean it's easy.

Good luck whatever you decide and yes from previous replies... I will agree, whatever you do, DON'T reaffirm.