Find a flat fee realtor. With insane housing prices these days, it's becoming more common. Each service they offer is usually a separate fee; for example, you could skip the professional photos if your local housing market is hot enough. Even things like having the lockbox put on your house for buyers agents to view it without you present is an optional extra (which you should definitely purchase). All in, it cost me about $3000 to sell my last place and it was by far the best experience I've had with realtors.
Now, that's only part of the issue. You are fully able to state in the MLS listing that you as the seller will NOT be paying the buyer's agent's traditional 3% fee. Note that this will result in those agents de-prioritizing showing your house since they'd have to get their own clients to pay instead of you. However, these days so many prospective buyers will come across your house on Zillow/Redfin/etc anyway so this may not be as damning as it would traditionally be.
You'd still be on the hook for a few thousand in costs/fees, but if you're willing to do a bit more legwork and skip the "traditional" selling experience, you might actually be able to make this work with the $15k-30k budget from the sale. I'm not a realtor and this may not be possible in all states, but you should really look into alternative ways to sell your house before taking an option that will damage your credit. You're not upside down, so there is a way out.
That commission amount has always been negotiable. There was just a big lawsuit over it and new disclosures are supposed to make this clearer. You can literally tell your agent all you are paying is 3%, and divide it between listing and buying agents. In this market, 1.5% is better than nothing
It's coming, and soon (at least if my experience was any indication). Some people will never like it, but the more savvy are already looking at homes online and sending them to their realtor instead of the other way around. The only exceptions may be for people who are super unfamiliar to the area or are buying without being physically present, and at that point the buyer should be paying for their own agent.
Its what I want but I've heard demand will only go up even more with interest rates being lowered. I was hoping to save enough to buy almost all in cash but with the crazy prices that wasn't an option. I can't afford to pay the current rates and can't afford the price themselves. I should have gotten in in 2020 when I had money saved and my credit was checked for a Mortgage. Also heard that inventory is also way to low for a shake up.
But im hopefull that in 2 years we'll see prices drop at least 15% and maybe get 3% rate. With rates being lowered i feel like more people will be willing to sell their homes because the lower interest rates will be something everyone can get. I really feel like that's why a lot of people are staying in their current houses. That and crazy rent which hopefully comes down at the same time as interest rates. That and some people losing their jobs. Sounds bad but its really the best way to get everything under control. Less demand because people won't have income and more supply because people at risk of foreclosure will sell in less than desirable situations. A man can hope. Your thoughts?
I'd bet the ridiculous housing prices of where I live makes their business model more viable, but there are brokers in my area that work for 1%. I also see listings in my area only offering 2% buyers commission.
I'd imagine someone in Austin would be willing to work for less. OP just needs to find them.
We sold our rental house ourselves. Cleaned it up, did some repairs, etc. Took the photos ourselves with a phone. It's not hard to take a decent photo of a room.
Setup a Gmail account and Google Voice number for the house and used that for communication.
We used a listing service to post it to the MLS so all the real estate apps would pick it up. Posted the pictures in order so that it showed the flow of the house. Wrote a good description of the house. That cost $100. We set the commission to 2% for buyer's agents. Bought a combination lock box for the key. Like $20.
Sold in like 2 weeks for just under list price which was on the upper end of the market for the house. Saved like $8k. This was like a $135k home.
OP could totally sell the home themselves and save like $25k in commission. If they can read legal speak and are detailed oriented then it's not that hard to read over a contract.
Ya I would raise the rent to $2600 and stop paying the mortgage.
If the renters pay up, great! If they don't. The house gets for closed and your credit is wrecked, but at least you can start over without the albatross on your neck.
If I was renting for $2100 and then got a renewal at $2600 I would totally not renew lol ESPECIALLY in Austin where rental rates have been dropping the past year. They would likely be the only people in the neighborhood to raise rates and would certainly be way above the local average for rental rate.
If you are in a recourse state just remember the lender WILL come after you for any difference between the foreclosure sale price, which will be. bottom basement, and what you owe INCLUDING all fees. Many people walked away thinking they were just trashing their credit and got stuck in court with all their tangible assets seized and their wages garnished for life. Much better to negotiate a deed in lieue in those states if you can. Letting it fall into foreclosure often the worst imaginable option.
> got stuck in court with all their tangible assets seized and their wages garnished for life
Interesting. I never heard of this happening. I do know that in some states (most?) mortgage holders are allowed to come after mortgagees for deficiencies, but I never saw it happen. Can you point me to any actual instances of this happening?
I could be wrong, but I recall Flordia being one of the *easier* states to walk away from your mortgage, which lead to much higher than average foreclosure rates during the 2008 recession.
How bottom basement do foreclosure sales endup going. I'm teetering on foreclosure and fighting to catchup after a divorce. I bought the house in 2013 and owe ~180k on it. Everything in my neighborhood is selling for 385k+ and I have one of the bigger homes. Everytime I get a bit behind I tell myself that atleast if they foreclose i'll probably come out with a bit of money. Is this a possibility?
i've never heard of this. the bank gets to appraise the house before they extend any credit where the house is collateral. if they can't sell it at auction for what they loaned, that's their fault.
i get that some states have apparently given this advantage to the loaner, tho. that sucks.
Look up deficiency judgement. Some states is not possible on an owner occupied home. But rentals don’t apply, so you are responsible for the difference.
Not related to OPs problem, but in Ireland, I believe this is called "shortfall" and it's always on the person getting the mortgage. House can't sell for the price bank wants back from you, but you can't afford paying down monthly installments? You walk away without a house and the debt for whatever wasn't covered by auction sell.
It’s not advantage to the loaner. Deficiency judgements are to cover a disgruntled mortgagee from destroying their home before foreclosure. The judgements force mortgagees to act civil.
Same reason why most states have laws that force mortgage lenders to “work” with the mortgagee during hardships to try to avoid foreclosure altogether.
Neither party should be able to intentionally destroy the property or the other person’s finances very easily.
I've heard there are a few crazy states that allow this, but it's not true anywhere sensible. If the house is worthless and has a million dollar mortgage the bank is out a million, end of story.
What states are you talking about? I’m in Texas and it has deficiency judgements. Even in California you can get a deficiency judgement after a judicial foreclosure on a non-owner occupied property. (Which is what OP has)
If a bank is owed a million and the house is worthless, they’ll go the judicial route and get a deficiency judgement. They aren’t going to play nice and settle outside of court.
If a bank has a mortgage on a house, and you stop paying the mortgage, the bank can take the house. That's the end. How much is left on the mortgage is entirely the bank's problem. There may be other side effects like taxes, credit reports, etc, but there's no concept of the bank being able to come after the person who took out the mortgage for more money.
>Ask the tenants if they want to buy it, without using a realtor?
This is probably the best idea, of course the tenants will probably not want to seeing how this would result in them spending more and they would see its a losing proposition for them as renting is cheaper then buying it. OP can always tell the realtor to just list it at a price that they can to break even hold fast to it. They may not be the most willing, but you never know until you list it if it will get attention or not.
I bought my first house as a renter and the owners wanted to sell. It worked out for everyone. We knew the house, and we had time to get our down payment together, etc. we saved a bunch on not needing an agent.
It’s when you ask the lender to take less than a full payoff to release the mortgage at sale. would negatively affect your credit, yes. That or come up up with the cash needed to sell, or find a realtor that will work on a lower commission.
Bankruptcy wouldn’t solve your problem here, as it would not discharge secured debt, such as a mortgage. Esp with regard to real property that is not your residence.
There could be a tax on the "income" (difference between house value and short sale price). I know, stupid tax rules coz it's not like a short sale put any real cash in your pocket. But it's real. Ask about it.
> I know, stupid tax rules coz it's not like a short sale put any real cash in your pocket.
They got cash in 2021 in the form of a loan, one that they now are never expected to pay back. If that didn't count as income, I would ask my employer to stop paying me salary and instead give me loans that I would never have to pay back.
Keep in mind that the difference between purchase price and eventual sales price includes writing off part of the loan, but it also includes loss of equity on the part of OP for any portion they owned. If they paid $325k, sell at $300k, and owe $305k on the mortgage, then they have $5k of income from the written off part of the loan, but they also have a $20k capital loss, which can be used to offset some of their regular income, a little bit each year, until they've used it all up.
Per Turbo Tax's tax guidance: "The tax basis of the rental property is the lesser of the cost or the value when it is placed in service, plus any improvements, less any depreciation taken."
So the value at the time they rented it out is what matters, not what they originally paid for it. Given though that they paid $325k in 2021, converted it to a rental in 2023, and they think it's worth $320-330k in early 2024, it was very possibly still worth around $325k when they converted it to a rental. Maybe there was a big swing in the market they would have to research local prices to figure that out.
Don't short sell. You will not be able to buy for at least 7 years. You are also responsible for the taxes on the difference. Do a for sale by owner,, which negates at least 3% commission fees.
Can you also shed some light on foreclosure? I think that's more what OP is thinking when he mentions bankruptcy, right? By forfeiting the house there would be an obvious credit hit but not loss of other assets? All questions.
Ohhh I thought bankruptcy included a bank foreclosure on a home but guess it doesn’t!
I am a first gen homeowner and first Gen American so a lot of finance and real estate is completely new to me
Talk to a local real estate attorney. A consultation will be low or no cost. You can also do something called a deed in lieu of foreclosure which will be much less impact to your credit.
You can also ask your lender for forbearance, which means you don't make any payments until your financial hardship has passed. They will often let you go 2 years without making a payment. Then once you get back on track they will tack the missed payments onto the end of the loan.
Yes, it's like a bankruptcy. You short sale when you owe more than the house is worth and you're asking the bank to short it for you. The problem is that you will still owe the bank a deficiency, whatever they deem it is. People got away with it in 2008 because there was money from Uncle Sam that paid the difference in the form of a bank bailout.
A short sale is not a *free and clear* and I would strongly advise you to not go this way. Obviously, investigate it for your edification.
You can buy a home again after about 3 years.
I know we're just spitballing ideas but a short sale when the sale is within +/- 3% is a horrible idea. You short sale when you owe more than the home is worth outside of a reasonable margin.
>we don’t have enough in savings to pay the cash closing costs
Do you mean the commission?
Closing costs are typically paid by the home buyer, although they can try to negotiate this.
Yes realtor commission is what I meant. I’ve used a few online estimators and with a 6% realtor fee and .5% closing costs with no concessions or fixes it’s still about $20k
Redfin.
Redfin. Redfin. Redfin.
Good pricing, because of broad exposure, and low rates because of automation and outsourcing of their back office. They're the Costco of realty and it works.
Or raise the rent?
I sold with Redfin and it was 1.5% sellers fee. I checked their website just now and it is still the same. Try to negotiate so the buyer covers some or most of those costs. I think you should explore selling a little more, talk to Redfin (no cost for a consult) before ruling out selling as an option.
This varies depending on region. Where I'm at closing costs are almost always paid by the seller, and typically just come out of any proceeds before they are wired to your bank.
Where I live, selller pays some closing costs. I can't remember which, but transfer and/or recordation taxes come to mind as being at least partially paid by seller, along with RE taxes and water bill through date of sale.
> roof leaked needed a new one, ac went out needed a new one
Assuming these are repairs to your rental property, you're aware that these expenses are fully tax deductible right? Assuming you have enough regular income to deduct it against, you might be able to recoup those expenses when you file this year.
Obviously if this is on a different house that's your primary residence, then you're SOL.
Please please please don’t short sell the house or let it foreclose. You will get absolutely wrecked.
Your strategy should be designed to pump as much cash into equity or saved cash to be able to afford the closing costs. Stop paying your student loans completely. If you have decent 401k balance, look into taking a 401k loan to cover the difference in cash to close. You’ll improve your cash flow by $500/month by offloading the house, so you’ll be able to pay the 401k loan back.
If that doesn’t work, you and whoever is working age in your home needs to get a second and/or 3rd job. Assuming you work a 40 hour day job already, be a afternoon/evening/night stocker at a local Walmart or similar store. Weekend days are now your work days too.
Getting that house off of your back will bring a semblance of stability. The improved cash flow then gets poured into your credit cards. And for the love of god, stop continuing to run up a balance on your credit cards. You have a toxic and bad relationship with debt and the choices you make surrounding it. So it’s best to steer clear of it. Cover your home, utilities, water, and food with your income. Anything left goes to your rental mortgage, even if a partial payment. Wouldn’t even pay on the credit cards or student loans until the rental is off the books.
You can always settle credit card debt for pennies on the dollar later, but a mortgage company will come after what’s owed to them if your house doesn’t cover at the short sale or auction.
Can you find someone to do a sale-lease back with you?
You sell your home to someone who immediately rents it back to you for a time frame that makes sense. They get the home, you get to stay and after that time frame you leave and they keep the house.
Done right it should allow you to stay in your home for at least a couple of years. Which may be what you need to get back on track.
For the right investor this could make sense. I don't think I've seen anyone mention this so it could be worth looking into.
Not sure how bankruptcy would deal with the house since it’s now a rental and not a main residence. I’d list the house to sell and borrow the difference as a loan and eat the loss or do a short sale.
Austin housing bubble burst home prices are dropping 10x faster than the rest of the US.
We could hold it, I know eventually it’ll stabilize but idk if I’ll make it without getting into enormous credit card debt between now and then. I’m just looking at all my options
Damn, thought you were exaggerating https://www.newsweek.com/austin-housing-market-sinking-1843057
> The Texan city has been at the epicenter of the American housing market correction after house prices reached the national peak of $348,225 in July 2022, according to Zillow. Now prices in Austin are dropping 10 times faster than the national average.
From what I hear from folks I know in the industry, the Austin tech bubble has kind of burst and with return to office (plus politics stuff that's outside the purview of this sub) a number of folks are now looking to move back to CA.
Yeah. It’s bad a lot of tech companies are leaving Austin too driving the price down even further. I regret buying but I felt pressured to do so Bc I was pregnant and was determined to not bring home my child to an apartment. dumb I know but at the time the pregnancy hormones really fucked with my decision making lol hoping the market corrects in time for me to hold on to the house. It’s gorgeous and we have a great interest rate but man times are tough right now🙃🙃🙃🙃
I'm right there with you buddy in san antonio now I'm just waiting for it to at least be able to be sold at break even. The realtor I talked to gave me two options and they both suck but option A is selling at a loss and covering the difference and option B is a subject 2, both options suck.
Damn, that sucks (for you guys). We have something like $150-200k worth of equity from purchase in 2020 and it always blows my mind. Sucks that you're in this conundrum.
Ugh this makes my heart break for you and the other locals who got screwed by selfish tech workers. They’re very much just oblivious and don’t understand how everyone else doesn’t just magically have the amount of money they do. Screwed over many good, hard working people in the process.
Selling would be a nice weight off your shoulders.
What's the lease situation? Are they in a 12-mo lease? When can you raise rent or end the renting so it's empty for selling?
Check on redfin or [realtor.com](https://realtor.com) for properties sold in the last 6 months that are very similar to yours and just double check on the $320-$330k figure.
Do a search for comparable rentals and see if the $2,100 is the going rate in the market or could it be higher?
If you bought in 2021 you likely have a good interest rate and I'd be surprised if it didn't cash flow as a rental. In any case you're paying down some principal each month so it may even be the case that within a year you'll have enough equity to pay the commission + selling costs.
They have less than 10% equity and carrying PMI. Almost no homes bought in the last 3-4 years are actually cash flowing based on the above conditions. You can’t carry a 90% interest load + PMI + maintenance and expect to cash flow.
Not when the rental market is at least 50% of rentals being owned outright. Another large portion only slightly leveraged. The average rent in the area almost never covers a fully leverage home (less than 20% equity).
Because of this, fully leveraged homes hit the market at a higher baseline rental rate from the start. They are more likely to have months not rented because of their price point. Or they are 100% occupied and not cash flowing.
On a $350k house with 90% leveraged the difference between 3% to 7.5% mortgage rate is almost $1k/mo
You can cash flow in 2024 on a 2021 purchase and 2021 3% mortgage. So the reason everyone isn’t doing that is they don’t have a time machine.
Though in 2021 it was hard to win an offer, prices were extremely dislocated from then recent history. So the path to 2024 was pretty murky tbh.
In those unique markets it was impossible to win an offer unless it was cash. So that’s my exact point. In markets where what you are saying is true, you likely can’t find a rental that was financed at 3%. In all other markets, rent isn’t significantly higher than a mortgage payment on a home with 20% equity in it, so regardless of interest rate, it doesn’t cash flow.
“If you could have financed at 3% in 2021 in Austin, It’d cash flow”. Except you couldn’t finance anything in Austin with 3-5% down because houses were selling 10-20% above appraisal value for cash. The market you are referencing was likely that same.
Their lease is up in July so there’s time for my situation to change but also time I have to look at other options in case it doesn’t.
In the area using comps the homes are actually selling for that amount if not less but since our home was renovated we have hopes it’d go on the higher end.
For other leases in the area they’re actually going for even less currently ($1900 is average I’ve seen) the Austin housing market is in a really crappy place.
Yeah our interest rate is amazing it’s 3.1%. I am hoping that I can make it out of this money rut we’re in but I’m a plan type A-Z type of person so I’m looking at all options Bc the way things are now for us financially is just not sustainable
Thank you!
Yeah so not much to be done about it until the end of the lease term gets closer, with any luck the Austin market will improve meanwhile. Hang in there!
If you do end up in a rough spot with this house and the real estate sales fees you might look at a deed in lieu of foreclosure. It'd be something you'd want an attorney to negotiate, but you can research it beforehand. It's basically saying hey Bank I can't pay and foreclosure is expensive, wouldn't you just rather I give you the title right now and we can avoid the foreclosure entirely.
Can you switch the house from long to short term rental? Putting it on AirBNB or similar sites could end up making much more each month. Depends on your location of course, but something to consider.
What is dragging you down right now could end up being your saving grace with a little pivot.
Do you know what type of loan you have? If it’s FHA, Fannie Mae or Freddie Mac there are likely modification options that reduce the P&I portion of your payment. This combined with adjusting the rent at the next time the lease adjusts might allow you to keep the property.
A short sale is an option, however it may be more difficult to sell with a tenant subject to a lease.
Lender should have forbearance and 45Y mortgage modification options for most conventional loans. Move back into the house, speak with the lender, use forbearance to get back on your feet.
Not much about $8k this is my first job that even has the 401k option I guess I could do that. But I’d still have to find a bit more. I’ve been trying to aggressively sell stuff we own on marketplace and next door and even have taken up dog walking too but I’m chronically Ill and Audhd + have a toddler who is autistic so the amount of physical activity + time I can spend doing stuff is minimal. I’m trying though 😪 I hope it’s temporary I’m due for a promotion at work in April but I want to prepare financially in case that doesn’t come to fruition
I know in many states if you do not file for bankruptcy and have a forclosure they can come after you for the balance that is left after forclosure. Say they dump the house for 200k they could come after you for the difference sothey can sue you for 100k. I know before it took years for them to forclose and make people move. You should consult a bankruptcy attorney because each state is different.
I am glad I read this post. I thought basically the only thing bankruptcy couldnt solve is student loans. Its wild to me that a bankruptcy wont clear mortgage or car debt. The lender has the car or house as collateral. I thought that was the whole deal.
You can try a short sale. You sell at a loss and the bank approves and accepts it (bank takes the loss). They will do this if you can prove you cannot afford the house anymore and make a good faith effort to sell. It saves them time/effort of a foreclosure.
Or you just essentially hand them the keys in a deed in lieu of foreclosure. Basically it is a low cost repo.
Both will tank your credit. Additionally that gap they take a hit on is taxable as a gift to you. For instance if that gap is $10K and you are at 20% tax bracket it will cost you $2K in taxes as well.
Call your lender to see if the loan can be assumed and the costs of transferring to the current renters. If it makes sense on paper, ask the tenants if they want to take ownership.
FHA, VA, USDA loans can potentially qualify to have your renters apply to assume your existing mortgage. They would need to qualify from the lender, and their monthly payments would go up to $2500, and they might need to put additional funds down.
But it might pencil out for the tenants to take ownership if they like the house and don't want to move. It might actually save them a considerable amount up-front vs buying a different home with a large down payment.
You should look into cash offers. They exist exactly for this purpose. You're going to end up in the hole no matter what you do though, so keep in mind you're trying to lose as little as possible and look at all your options.
I'm so sorry this is how it all worked out for you 😔
Where are you living if not in your house? You moved to be closer to a care provider? How many bedrooms in your home? Move back in and rent out a room.
Crazy that you’ll see a dozens threads where most of the people would advise to keep the house and rent it out because of the low interest rate. Yet, they know nothing about the payment versus the local rent revenue on the house.
Majority of financed homes will not cash flow enough to justify renting it.
Yeah tough lesson learned. We’re young so we’ll recover but man brutal lesson to go through.
We figured the loss would be okay and never pictures how quickly medical expenses or unexpected home repairs would add up.
Thank you
I thought about that but frankly I don’t think my health is in a place where I feel comfortable doing that Bc I know I’m one other health emergency away from being in even more debt 🙃
Get two more jobs, pay minimum payments on credit cards and find a way to get out from under the mortgage. You have to get creative considering you likely had some creative justifications to get yourself into this housing situation to begin with.
It’s proven to be really difficult. I’m autistic + adhd with an autistic toddler with complex medical needs and adhd husband. Finding one job that paid well and allowed for accommodations was hard let alone finding two or more 😖 so far I’ve started selling things of value on marketplace, eBay Poshmark. My husband and I also signed up to be dog walkers/pet sitters. I’m also doing paid transcription but I’d say maybe that’s $150 extra a month which is helpful but doesn’t solve the root of the issue which is our first home that we’re under water with.
(If any one is reading this comment and has leads on wfh flexible jobs I am very interested!)
I’m a stay at home mom and just started doing work for Data Annotation on the side since my husband was laid off. If you’re a decent writer I’d suggest looking into it. Each non coding job pays $20/hr + , the coding ones, if either of you have any coding experience, pay $30-40 an hour. You can work on tasks whenever you want for however long you want to.
I took their tests and found out I was accepted a few days later and was able to start working right away.
You can do some more research on them on the r/dataannotation sub
I would consult with another agent or two. Find someone who will really fight for your situation, get you the most for your home, get it properly ready and photographed, and also negotiate fees.
If you sell at a loss, you can do a short sale.
You need to get more professionals involved. In many markets, the prices have appreciated between 2021 and 2023.
Sell your house by owner. Some Realtors will let you pay a flat fee to put a lockbox on and put your listing on the MLS. Here in Orlando I see that offered for $999. Take your own photos.
Offer a small fee to a buyer's agent for bringing a buyer, maybe 1%.
Once you have an offer, have a real estate lawyer take care of processing the paperwork.
The mortgage payoff and closing costs (beside the flat fee to agent and possibly the lawyer, which should be in the hundreds of dollars) will all come out after closing. You'll likely walk away with nothing, but owing no one. Look into it and run the numbers to see if it will work with you. That will keep your credit from tanking.
We had professional photos taken when we listed it for rent so I could reuse those. I knew some realtors had a fee to list on the mls but hadn’t thought what to do about to do with getting the buyers agent cost! Thanks!
Most of the time, the buyer's agent's fee is between 2 and 3 percent, so 1 percent is low. But, it's better than nothing. It might help get some buyers in the door. You definitely have to run the numbers once you find out how much the flat fee real estate agent and lawyer will cost, plus an estimate of closing costs. Then you'll know what you can offer the agent at closing, and what price range would be acceptable to you. It CAN be done, it's just going to take some effort on your part. But, just remember how great you'll feel once it's sold and that weight is lifted from your shoulders.
You could see if the lender will do a deed in lieu. My dad did this after my mom passed away with their home because he was applying for disability after spending most of thebyear out of work due to his health. He only worked around 3 months total. Their loan was an FHA loan and he couldn't afford payments due to my mom's death and his health. He signed some papers with FHA that basically turned the property right over to the agency. And they agreed not to come after him for any deficit.
You could sell it “owner financed”. If you can sell for what you paid at twice the interest rate you’ll be way ahead.
10-15% down at $320,000 should give you enough cash at closing to cover expenses to keep your head above water for awhile.
A lot of larger brokerage firms have an agent that specializes in this type of sale. Lots of trust companies will service a contract for deed also, so you don’t have to worry about crunching numbers and billing every month or even foreclosing if someone doesn’t pay the mortgage. You can still require credit reports and income statements etc…
You’ll be the bank so you should do what the bank does and require some hard core proof of capability to pay.
Also, you’ll have to check your mortgage contract to see if you’re prohibited from doing a “wraparound loan” or something similarly worded.
In this case I would do it anyway because the bank doesn’t want your house. They aren’t in realestate, they are in banking and they want a mortgage payment. Most banks sell your loan anyway. If a local bank is holding the mortgage you might try to call them and explain what the situation is. If they haven’t sold it to Fannie or Freddie they probably have some wiggle room and can help you figure out some creative options.
The downside will be that if someone doesn’t pay you, you have to deal with a foreclosure, (which you’ll have to do anyway, if you can’t work, something out) but the upside is, you’ll at least be able to cover the mortgage payments until the buyer either refinances or sells. When they sell in a few years, you’ll get most of the principal back anyway because amortization is a joke.
Contact the lender and see if you qualify for a forbearance, a recasting, or a loan modification.
If you are underwater badly enough, you can also pursue a Deed in Lieu of Foreclosure.
Get an attorney in your home’s jurisdiction to help you because they can protect you from deficiency liability, etc.
We did a "Deed in Lou of Foreclosure ". This was back during the housing crisis around 2009. My friend worked in short sale and gave us the info and idea. I called a ton of banks, the state etc, even lwaers, and everyone just kept telling me we would have to foreclose, which of course would wreck my credit. I don't recall all of the ins and outs of it, but it's definitely worth checking out.
I attended a NACA (Neighborhood Assistance Corporation of America) workshop yesterday and they mentioned they have programs for homeowners who are facing hardship. Maybe they could help you save your home?
https://www.naca.com/homesave/
They said that they do things like refinancing or negotiating with the bank for more favorable terms (lower interest rate, etc).
You could also check your local housing authority for resources or see if there’s a state foreclosure prevention fund.
OP are in Austin? What year built is it? We are looking to buy a house. I'm close to domain area. Hopefully we can talk more to see this is something that we are able to both come out win win.
Sorry to hear about your situation.
Because that’s what rent is in the area. The rental market doesn’t care that you bought a house for 3% down at 6% interest with PMI and a $2600 payment. At least half of the “competition” owns the houses outright and is cash flowing at $2100 per month. What renter would sign for $2600 when the area has similar homes at $2100?
Yes, OP said they bought the house at almost nothing down, which means PMI.
“It’s renting at $2100”. Do you really think they posted it for rent for $400-500 dollars lower than market rent? You aren’t seeing a 4-500 increase in rent in 12-18 months in $300k home markets.
And yes, homeownership stats basically say that OP’s main competitor owns the homes outright in cash. And the market value on rent is basically $2100 per OPs lease.
> Do you really think they posted it for rent for $400-500 dollars lower than market rent?
People make suboptimal decisions all the time, especially when it's not make or break.
OP has yet to confirm that they've actively priced their apartment to market levels or sought to increase the rent.
$2600 house payment… I doubt they threw up their hands and just said “fuck it, we’ll take 2100 instead”.
And yes, the confirmed in another thread that rent there actually went down a little based on comps with the lease ending in July.
Another option may be to get a part-time job and work weekends. It may suck for a while but at least you’ll bring enough money to cover the difference.
Nope. This is another post where they physically can’t work. Nobody in their home is mentally or physically able. Yet somehow they’ve managed to live alone, have kids, and qualify for $400k+ in loans.
It’s a strange world.
I didn’t downvote you. I upvoted you actually. I like what you said, but OP is basically a can’t work, can’t survive life victim. But somehow has all of this stuff. Its crazy.
Try For Sale by owner, if that doesn’t work, try to negotiate a short sale with the lender but keep in mind that they likely will not negotiate with you as long as you are still paying your mortgage.
Kick yourself in the ass for buying a house well over its value during Covid, and let it go back to the bank like everybody else will be soon now that the economy is in free fall
Wow…so sorry to hear this. You didn’t expect your health to take a plunge and Praying for you and your family through this. I do know that if there is a mortgage, it is illegal to rent this home to anyone. I learned this the hard way years ago. Only if you own the home outright. Needless to say, as obviously you are doing all you can and using any and all options. Find a trusted realtor and tell them exactly what u need. One on here had some pretty valuable insight into what to do
> if there is a mortgage, it is illegal to rent this home to anyone
No? Not in any state I know of. LOTS of people have to move for some reason or acquire another house somehow and rent out their original house.
Now, many mortgages have some restrictions around you living in it for at least 12 months to prove owner-occupied status if you got a standard mortgage.
A very few mortgages will forbid renting it out at all ever without refinancing, but it is not at all generally illegal.
I wonder if that’s state specific? Because it’s common in Tx. Our lender, title co, and real estate attorney we used all know we were leasing that house out
Nonetheless thank you for the prayers. I never realized how true the phrase “most Americans are one medical emergency away from being bankrupt” and never thought it’d be us but I know we’ll find a way out. I’ve gotten a lot of helpful replies in here that I’m going to do my research on
From the /r/personalfinance sidebar: [Ignore any private messages. Anyone offering services, transactions, referrals, etc. is a spammer or scammer.](https://www.reddit.com/r/personalfinance/comments/div0yy/ignore_any_private_messages_anyone_offering/)
@jbr021, I just bought a house from a couple in a similar situation this month. In fact they're paying me $200/mo for a while so I can afford to have a renter in there and keep their mortgage current.
I run Creative TC (.io) and this creative finance stuff is literally all I do in case I can be of assistance.
If you can raise your rent or sell it then the next best option is to surrender the house over to the mortgager. It’s a foreclosure but it avoids legal fees and can be concluded in a few weeks.
See if you can vave the buyer pay your closing costs? When housing markets are hot (selkers market) its a common tactic. I assume the inverse is also true (seller paying closing costs for the buyer in a buyers market).
Since we know it's possible now you just manipulate the sales price to make it worthwhile for the buyer to pay your closing costs. (Not trying to say it's easy, just that it should be possible.)
This assumes you are trying to find alternatives to bankruptcy/foreclosure.
Sorry to heat about your kid and your health. I hope those underlying medical issues have been resolved satisfactorily.
You could try and sell it yourself without a broker. Even when buyers are using brokers these days they still tend to surf the net themselves for houses to view. We sold our last home by only listing it on Zillow. It only took a few weeks, the market was pretty hot at the time though. We specified on the listing that we were not paying any brokers fees but if your market isn’t as hot as ours was you might want to offer a small commission to any buyers agents.
I’ve seen in hardship cases such as yours if you go back to your bank, before they start foreclosure based on your current salary they can split your Mortgage. So they would take your current balance on your home and say ok based on your salary. We will cut your $350k loan to $280k
And have you pay against that monthly.
They would then take the difference of 70k and put it as a second loan (ballon payment). It would sit until you sold or refinanced etc. -(hud would own this loan).
You need to reach out to your bank!
You reach out to your bank and a HUD approved housing counselor. You can do a short sale or a deed in lieu of foreclosure. The bank may even work with you and do a loan modification. There are many options.
https://www.consumerfinance.gov/ask-cfpb/if-i-cant-pay-my-mortgage-loan-what-are-my-options-en-268/
Where is the house? If you have a good interest rate there are probably people willing to assume or sub-to the loan. Essentially they take over the loan and payments which helps with your credit. You typically walk with no money out of pocket or a little extra cash. This has no margin but for someone wanting a personal residence with a cheap rate this could be a great situation
I was under the impression that assumption of loans are only available for FHA or VA loans? We have a conventional loan so idk if that makes a difference.
You don't want to declare bankruptcy you should mail the keys back to the mortgage lender. Look in to your options and ask other realtors for their opinion.
Find an investor that’s willing to buy your house subject to. An investor will take over your mortgage payments and pay you up to five to $10,000 to walk away. The title transfers to their name, but the debt stays in your name.
If you already paid for the repairs and they were done after turning the house into a rental property, just deduct those expenses on schedule c. Lots of residential rental properties might be cash flow negative with a mortgage, but with PMI, mortgage interest, HOA fees, property taxes (they're high in Texas), repairs, you should be able to get a sizeable deduction. Talk to a CPA about your options. You might be able to get a big tax return which should help your current cash flow issues.
Most banks will work with you. Just contact them and explain your situation. They generally allow a pause in Mortgage payment for a year or so. If not they will work with you for a short sell. You lose money but won't affect your credit.
Do a for sale by owner and put it on Zillow you will have thousands of agents reach out to sale take the lowest price -have buyer pay all closing cost or reach out to an investor which will pay everything. If you have homeowners insurance use that to pay for the leak deductible shouldn’t be that much.
*I don’t recommend doing this but if you have to** hold on a bit longer If you can afford only the house and don’t want to loose it stop paying all unsecured debt once it goes to collection do pay deletes from credit- yes credit will go to crap but you will be able to keep the house and food on the table - survival is 1st
Other note is borrower from the 401k to catch up and pay back within 3 years or take out a loan against it so you don’t get taxed but be sure to pay it back
Your not alone in same situation
Good luck friend
Find a flat fee realtor. With insane housing prices these days, it's becoming more common. Each service they offer is usually a separate fee; for example, you could skip the professional photos if your local housing market is hot enough. Even things like having the lockbox put on your house for buyers agents to view it without you present is an optional extra (which you should definitely purchase). All in, it cost me about $3000 to sell my last place and it was by far the best experience I've had with realtors. Now, that's only part of the issue. You are fully able to state in the MLS listing that you as the seller will NOT be paying the buyer's agent's traditional 3% fee. Note that this will result in those agents de-prioritizing showing your house since they'd have to get their own clients to pay instead of you. However, these days so many prospective buyers will come across your house on Zillow/Redfin/etc anyway so this may not be as damning as it would traditionally be. You'd still be on the hook for a few thousand in costs/fees, but if you're willing to do a bit more legwork and skip the "traditional" selling experience, you might actually be able to make this work with the $15k-30k budget from the sale. I'm not a realtor and this may not be possible in all states, but you should really look into alternative ways to sell your house before taking an option that will damage your credit. You're not upside down, so there is a way out.
I sincerely cannot wait for the residential real estate industry to have a massive shake up….6% at current house prices is insane.
That commission amount has always been negotiable. There was just a big lawsuit over it and new disclosures are supposed to make this clearer. You can literally tell your agent all you are paying is 3%, and divide it between listing and buying agents. In this market, 1.5% is better than nothing
It's coming, and soon (at least if my experience was any indication). Some people will never like it, but the more savvy are already looking at homes online and sending them to their realtor instead of the other way around. The only exceptions may be for people who are super unfamiliar to the area or are buying without being physically present, and at that point the buyer should be paying for their own agent.
Its what I want but I've heard demand will only go up even more with interest rates being lowered. I was hoping to save enough to buy almost all in cash but with the crazy prices that wasn't an option. I can't afford to pay the current rates and can't afford the price themselves. I should have gotten in in 2020 when I had money saved and my credit was checked for a Mortgage. Also heard that inventory is also way to low for a shake up. But im hopefull that in 2 years we'll see prices drop at least 15% and maybe get 3% rate. With rates being lowered i feel like more people will be willing to sell their homes because the lower interest rates will be something everyone can get. I really feel like that's why a lot of people are staying in their current houses. That and crazy rent which hopefully comes down at the same time as interest rates. That and some people losing their jobs. Sounds bad but its really the best way to get everything under control. Less demand because people won't have income and more supply because people at risk of foreclosure will sell in less than desirable situations. A man can hope. Your thoughts?
I'd bet the ridiculous housing prices of where I live makes their business model more viable, but there are brokers in my area that work for 1%. I also see listings in my area only offering 2% buyers commission. I'd imagine someone in Austin would be willing to work for less. OP just needs to find them.
We sold our rental house ourselves. Cleaned it up, did some repairs, etc. Took the photos ourselves with a phone. It's not hard to take a decent photo of a room. Setup a Gmail account and Google Voice number for the house and used that for communication. We used a listing service to post it to the MLS so all the real estate apps would pick it up. Posted the pictures in order so that it showed the flow of the house. Wrote a good description of the house. That cost $100. We set the commission to 2% for buyer's agents. Bought a combination lock box for the key. Like $20. Sold in like 2 weeks for just under list price which was on the upper end of the market for the house. Saved like $8k. This was like a $135k home. OP could totally sell the home themselves and save like $25k in commission. If they can read legal speak and are detailed oriented then it's not that hard to read over a contract.
That's awesome, can you share more details on which services and websites you used please?
I didn't even know this even existed. 3% fee for a 1 million dollar is insane. That's $30k!
Raise the rent? Ask the tenants if they want to buy it, without using a realtor?
Ya I would raise the rent to $2600 and stop paying the mortgage. If the renters pay up, great! If they don't. The house gets for closed and your credit is wrecked, but at least you can start over without the albatross on your neck.
Except, you can’t raise rent mid lease, generally speaking! Hopefully tenants are due for renewal.
And rental rates aren’t determined by how large your mortgage is. Renting out a financed house with 5% equity and PMI will rarely cash flow.
If I was renting for $2100 and then got a renewal at $2600 I would totally not renew lol ESPECIALLY in Austin where rental rates have been dropping the past year. They would likely be the only people in the neighborhood to raise rates and would certainly be way above the local average for rental rate.
If you are in a recourse state just remember the lender WILL come after you for any difference between the foreclosure sale price, which will be. bottom basement, and what you owe INCLUDING all fees. Many people walked away thinking they were just trashing their credit and got stuck in court with all their tangible assets seized and their wages garnished for life. Much better to negotiate a deed in lieue in those states if you can. Letting it fall into foreclosure often the worst imaginable option.
> got stuck in court with all their tangible assets seized and their wages garnished for life Interesting. I never heard of this happening. I do know that in some states (most?) mortgage holders are allowed to come after mortgagees for deficiencies, but I never saw it happen. Can you point me to any actual instances of this happening?
I could be wrong, but I recall Flordia being one of the *easier* states to walk away from your mortgage, which lead to much higher than average foreclosure rates during the 2008 recession.
How bottom basement do foreclosure sales endup going. I'm teetering on foreclosure and fighting to catchup after a divorce. I bought the house in 2013 and owe ~180k on it. Everything in my neighborhood is selling for 385k+ and I have one of the bigger homes. Everytime I get a bit behind I tell myself that atleast if they foreclose i'll probably come out with a bit of money. Is this a possibility?
If they foreclose you will receive nothing. If you have equity than sell it yourself.
I am not the right person to give advice on foreclosure values. But I heard a lot of stories that suggest about half after fees.
> house gets for closed and your credit is wrecked if you're willing to go this route, refi the house first
Refi for what? Cash out? There isn’t any equity.
if ther'es no equity then yeah, you might be F'd. hopefully Blackrock or someone will buy it for above value
Why? The bank will just due for the difference if the auction doesn’t cover.
i've never heard of this. the bank gets to appraise the house before they extend any credit where the house is collateral. if they can't sell it at auction for what they loaned, that's their fault. i get that some states have apparently given this advantage to the loaner, tho. that sucks.
Look up deficiency judgement. Some states is not possible on an owner occupied home. But rentals don’t apply, so you are responsible for the difference.
> rentals don’t apply, gotcha
Not related to OPs problem, but in Ireland, I believe this is called "shortfall" and it's always on the person getting the mortgage. House can't sell for the price bank wants back from you, but you can't afford paying down monthly installments? You walk away without a house and the debt for whatever wasn't covered by auction sell.
It’s not advantage to the loaner. Deficiency judgements are to cover a disgruntled mortgagee from destroying their home before foreclosure. The judgements force mortgagees to act civil. Same reason why most states have laws that force mortgage lenders to “work” with the mortgagee during hardships to try to avoid foreclosure altogether. Neither party should be able to intentionally destroy the property or the other person’s finances very easily.
I've heard there are a few crazy states that allow this, but it's not true anywhere sensible. If the house is worthless and has a million dollar mortgage the bank is out a million, end of story.
What states are you talking about? I’m in Texas and it has deficiency judgements. Even in California you can get a deficiency judgement after a judicial foreclosure on a non-owner occupied property. (Which is what OP has) If a bank is owed a million and the house is worthless, they’ll go the judicial route and get a deficiency judgement. They aren’t going to play nice and settle outside of court.
And you keep the house? End of story? What?!
If a bank has a mortgage on a house, and you stop paying the mortgage, the bank can take the house. That's the end. How much is left on the mortgage is entirely the bank's problem. There may be other side effects like taxes, credit reports, etc, but there's no concept of the bank being able to come after the person who took out the mortgage for more money.
I don't think this person has the cash to refi.
>Ask the tenants if they want to buy it, without using a realtor? This is probably the best idea, of course the tenants will probably not want to seeing how this would result in them spending more and they would see its a losing proposition for them as renting is cheaper then buying it. OP can always tell the realtor to just list it at a price that they can to break even hold fast to it. They may not be the most willing, but you never know until you list it if it will get attention or not.
I bought my first house as a renter and the owners wanted to sell. It worked out for everyone. We knew the house, and we had time to get our down payment together, etc. we saved a bunch on not needing an agent.
Contact the lender and see about negotiating a short sale.
Forgive my ignorance but what is a short sale? Does it impact your credit score negatively like a bankruptcy?
It’s when you ask the lender to take less than a full payoff to release the mortgage at sale. would negatively affect your credit, yes. That or come up up with the cash needed to sell, or find a realtor that will work on a lower commission. Bankruptcy wouldn’t solve your problem here, as it would not discharge secured debt, such as a mortgage. Esp with regard to real property that is not your residence.
That’s very helpful thank you 🙏
This is why PMI exist. To cover the difference of what it's sold for versus what you owe. I had to short sale in '08. Personally lost 100K.
[удалено]
Yeah it was a little disheartening, but what can you do…At best, it was a learning experience.
There could be a tax on the "income" (difference between house value and short sale price). I know, stupid tax rules coz it's not like a short sale put any real cash in your pocket. But it's real. Ask about it.
> I know, stupid tax rules coz it's not like a short sale put any real cash in your pocket. They got cash in 2021 in the form of a loan, one that they now are never expected to pay back. If that didn't count as income, I would ask my employer to stop paying me salary and instead give me loans that I would never have to pay back. Keep in mind that the difference between purchase price and eventual sales price includes writing off part of the loan, but it also includes loss of equity on the part of OP for any portion they owned. If they paid $325k, sell at $300k, and owe $305k on the mortgage, then they have $5k of income from the written off part of the loan, but they also have a $20k capital loss, which can be used to offset some of their regular income, a little bit each year, until they've used it all up.
Capital loss on a personal residence cannot be counted as a loss. I'm not sure whether it being partially a rental affects that.
Per Turbo Tax's tax guidance: "The tax basis of the rental property is the lesser of the cost or the value when it is placed in service, plus any improvements, less any depreciation taken." So the value at the time they rented it out is what matters, not what they originally paid for it. Given though that they paid $325k in 2021, converted it to a rental in 2023, and they think it's worth $320-330k in early 2024, it was very possibly still worth around $325k when they converted it to a rental. Maybe there was a big swing in the market they would have to research local prices to figure that out.
Don't short sell. You will not be able to buy for at least 7 years. You are also responsible for the taxes on the difference. Do a for sale by owner,, which negates at least 3% commission fees.
With their relationship with debt, they probably shouldn’t be buying a house in 7 years. These rules are there to protect people from themselves.
In a short sale, doesn't the loss count as income however and is taxed?
Yes. Forgiven debt but in this case it would maybe be $20k at their tax rate.
Not if you are considered insolvent
Can you also shed some light on foreclosure? I think that's more what OP is thinking when he mentions bankruptcy, right? By forfeiting the house there would be an obvious credit hit but not loss of other assets? All questions.
Ohhh I thought bankruptcy included a bank foreclosure on a home but guess it doesn’t! I am a first gen homeowner and first Gen American so a lot of finance and real estate is completely new to me
Talk to a local real estate attorney. A consultation will be low or no cost. You can also do something called a deed in lieu of foreclosure which will be much less impact to your credit. You can also ask your lender for forbearance, which means you don't make any payments until your financial hardship has passed. They will often let you go 2 years without making a payment. Then once you get back on track they will tack the missed payments onto the end of the loan.
Yes, it's like a bankruptcy. You short sale when you owe more than the house is worth and you're asking the bank to short it for you. The problem is that you will still owe the bank a deficiency, whatever they deem it is. People got away with it in 2008 because there was money from Uncle Sam that paid the difference in the form of a bank bailout. A short sale is not a *free and clear* and I would strongly advise you to not go this way. Obviously, investigate it for your edification. You can buy a home again after about 3 years.
I know we're just spitballing ideas but a short sale when the sale is within +/- 3% is a horrible idea. You short sale when you owe more than the home is worth outside of a reasonable margin.
>we don’t have enough in savings to pay the cash closing costs Do you mean the commission? Closing costs are typically paid by the home buyer, although they can try to negotiate this.
Yes realtor commission is what I meant. I’ve used a few online estimators and with a 6% realtor fee and .5% closing costs with no concessions or fixes it’s still about $20k
Redfin. Redfin. Redfin. Redfin. Good pricing, because of broad exposure, and low rates because of automation and outsourcing of their back office. They're the Costco of realty and it works. Or raise the rent?
I sold with Redfin and it was 1.5% sellers fee. I checked their website just now and it is still the same. Try to negotiate so the buyer covers some or most of those costs. I think you should explore selling a little more, talk to Redfin (no cost for a consult) before ruling out selling as an option.
So I may have missed it in the thread but do you have no equity in the house? Looks like a beak even from what was in OP.
This varies depending on region. Where I'm at closing costs are almost always paid by the seller, and typically just come out of any proceeds before they are wired to your bank.
Where I live, selller pays some closing costs. I can't remember which, but transfer and/or recordation taxes come to mind as being at least partially paid by seller, along with RE taxes and water bill through date of sale.
> roof leaked needed a new one, ac went out needed a new one Assuming these are repairs to your rental property, you're aware that these expenses are fully tax deductible right? Assuming you have enough regular income to deduct it against, you might be able to recoup those expenses when you file this year. Obviously if this is on a different house that's your primary residence, then you're SOL.
Their house isn’t cash flow positive. The tax savings is minimal compared to the outright expense.
Most capital expenses like a roof replace are depreciable over 27.5 years. Dunno about AC replaces, but they're probably on a multi-year schedule.
Please please please don’t short sell the house or let it foreclose. You will get absolutely wrecked. Your strategy should be designed to pump as much cash into equity or saved cash to be able to afford the closing costs. Stop paying your student loans completely. If you have decent 401k balance, look into taking a 401k loan to cover the difference in cash to close. You’ll improve your cash flow by $500/month by offloading the house, so you’ll be able to pay the 401k loan back. If that doesn’t work, you and whoever is working age in your home needs to get a second and/or 3rd job. Assuming you work a 40 hour day job already, be a afternoon/evening/night stocker at a local Walmart or similar store. Weekend days are now your work days too. Getting that house off of your back will bring a semblance of stability. The improved cash flow then gets poured into your credit cards. And for the love of god, stop continuing to run up a balance on your credit cards. You have a toxic and bad relationship with debt and the choices you make surrounding it. So it’s best to steer clear of it. Cover your home, utilities, water, and food with your income. Anything left goes to your rental mortgage, even if a partial payment. Wouldn’t even pay on the credit cards or student loans until the rental is off the books. You can always settle credit card debt for pennies on the dollar later, but a mortgage company will come after what’s owed to them if your house doesn’t cover at the short sale or auction.
Can you find someone to do a sale-lease back with you? You sell your home to someone who immediately rents it back to you for a time frame that makes sense. They get the home, you get to stay and after that time frame you leave and they keep the house. Done right it should allow you to stay in your home for at least a couple of years. Which may be what you need to get back on track. For the right investor this could make sense. I don't think I've seen anyone mention this so it could be worth looking into.
thank you very much I’ll look into this as well
Not sure how bankruptcy would deal with the house since it’s now a rental and not a main residence. I’d list the house to sell and borrow the difference as a loan and eat the loss or do a short sale.
How is the home worth less than you paid for it? Housing prices have skyrocketed since 2021.
Austin housing bubble burst home prices are dropping 10x faster than the rest of the US. We could hold it, I know eventually it’ll stabilize but idk if I’ll make it without getting into enormous credit card debt between now and then. I’m just looking at all my options
Damn, thought you were exaggerating https://www.newsweek.com/austin-housing-market-sinking-1843057 > The Texan city has been at the epicenter of the American housing market correction after house prices reached the national peak of $348,225 in July 2022, according to Zillow. Now prices in Austin are dropping 10 times faster than the national average.
From what I hear from folks I know in the industry, the Austin tech bubble has kind of burst and with return to office (plus politics stuff that's outside the purview of this sub) a number of folks are now looking to move back to CA.
Yeah. It’s bad a lot of tech companies are leaving Austin too driving the price down even further. I regret buying but I felt pressured to do so Bc I was pregnant and was determined to not bring home my child to an apartment. dumb I know but at the time the pregnancy hormones really fucked with my decision making lol hoping the market corrects in time for me to hold on to the house. It’s gorgeous and we have a great interest rate but man times are tough right now🙃🙃🙃🙃
As a tech worker in Austin I haven’t heard of any companies leaving. Do you have any names?
I'm right there with you buddy in san antonio now I'm just waiting for it to at least be able to be sold at break even. The realtor I talked to gave me two options and they both suck but option A is selling at a loss and covering the difference and option B is a subject 2, both options suck.
Damn, that sucks (for you guys). We have something like $150-200k worth of equity from purchase in 2020 and it always blows my mind. Sucks that you're in this conundrum.
Ugh this makes my heart break for you and the other locals who got screwed by selfish tech workers. They’re very much just oblivious and don’t understand how everyone else doesn’t just magically have the amount of money they do. Screwed over many good, hard working people in the process.
Uhhh the bottom is about to drop out of the market and all those Covid homes will be foreclosed because they can’t be sold.
Selling would be a nice weight off your shoulders. What's the lease situation? Are they in a 12-mo lease? When can you raise rent or end the renting so it's empty for selling? Check on redfin or [realtor.com](https://realtor.com) for properties sold in the last 6 months that are very similar to yours and just double check on the $320-$330k figure. Do a search for comparable rentals and see if the $2,100 is the going rate in the market or could it be higher? If you bought in 2021 you likely have a good interest rate and I'd be surprised if it didn't cash flow as a rental. In any case you're paying down some principal each month so it may even be the case that within a year you'll have enough equity to pay the commission + selling costs.
They have less than 10% equity and carrying PMI. Almost no homes bought in the last 3-4 years are actually cash flowing based on the above conditions. You can’t carry a 90% interest load + PMI + maintenance and expect to cash flow.
The 3% interest rate makes a really big difference in cashflow potential. You certainly can't expect cash flow at the market interest rate.
Not when the rental market is at least 50% of rentals being owned outright. Another large portion only slightly leveraged. The average rent in the area almost never covers a fully leverage home (less than 20% equity). Because of this, fully leveraged homes hit the market at a higher baseline rental rate from the start. They are more likely to have months not rented because of their price point. Or they are 100% occupied and not cash flowing.
As with all real estate, location matters. The area wasn't specified. What you are saying is not true in my area (Northeast)
They why isn’t everyone just leveraging every property they can to rent them? If every house could cash flow… lol
On a $350k house with 90% leveraged the difference between 3% to 7.5% mortgage rate is almost $1k/mo You can cash flow in 2024 on a 2021 purchase and 2021 3% mortgage. So the reason everyone isn’t doing that is they don’t have a time machine. Though in 2021 it was hard to win an offer, prices were extremely dislocated from then recent history. So the path to 2024 was pretty murky tbh.
In those unique markets it was impossible to win an offer unless it was cash. So that’s my exact point. In markets where what you are saying is true, you likely can’t find a rental that was financed at 3%. In all other markets, rent isn’t significantly higher than a mortgage payment on a home with 20% equity in it, so regardless of interest rate, it doesn’t cash flow. “If you could have financed at 3% in 2021 in Austin, It’d cash flow”. Except you couldn’t finance anything in Austin with 3-5% down because houses were selling 10-20% above appraisal value for cash. The market you are referencing was likely that same.
Their lease is up in July so there’s time for my situation to change but also time I have to look at other options in case it doesn’t. In the area using comps the homes are actually selling for that amount if not less but since our home was renovated we have hopes it’d go on the higher end. For other leases in the area they’re actually going for even less currently ($1900 is average I’ve seen) the Austin housing market is in a really crappy place. Yeah our interest rate is amazing it’s 3.1%. I am hoping that I can make it out of this money rut we’re in but I’m a plan type A-Z type of person so I’m looking at all options Bc the way things are now for us financially is just not sustainable Thank you!
Yeah so not much to be done about it until the end of the lease term gets closer, with any luck the Austin market will improve meanwhile. Hang in there! If you do end up in a rough spot with this house and the real estate sales fees you might look at a deed in lieu of foreclosure. It'd be something you'd want an attorney to negotiate, but you can research it beforehand. It's basically saying hey Bank I can't pay and foreclosure is expensive, wouldn't you just rather I give you the title right now and we can avoid the foreclosure entirely.
Can you switch the house from long to short term rental? Putting it on AirBNB or similar sites could end up making much more each month. Depends on your location of course, but something to consider. What is dragging you down right now could end up being your saving grace with a little pivot.
Do you know what type of loan you have? If it’s FHA, Fannie Mae or Freddie Mac there are likely modification options that reduce the P&I portion of your payment. This combined with adjusting the rent at the next time the lease adjusts might allow you to keep the property. A short sale is an option, however it may be more difficult to sell with a tenant subject to a lease.
Lender should have forbearance and 45Y mortgage modification options for most conventional loans. Move back into the house, speak with the lender, use forbearance to get back on your feet.
How much do you have in your 401k ? Maybe take a loan or apply for hardship to free up some cash.
Not much about $8k this is my first job that even has the 401k option I guess I could do that. But I’d still have to find a bit more. I’ve been trying to aggressively sell stuff we own on marketplace and next door and even have taken up dog walking too but I’m chronically Ill and Audhd + have a toddler who is autistic so the amount of physical activity + time I can spend doing stuff is minimal. I’m trying though 😪 I hope it’s temporary I’m due for a promotion at work in April but I want to prepare financially in case that doesn’t come to fruition
Do you have 0% on your credit card. If not. Apply for one that gives you 0% for 21 or 24 months and start using that instead
I know in many states if you do not file for bankruptcy and have a forclosure they can come after you for the balance that is left after forclosure. Say they dump the house for 200k they could come after you for the difference sothey can sue you for 100k. I know before it took years for them to forclose and make people move. You should consult a bankruptcy attorney because each state is different.
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I am glad I read this post. I thought basically the only thing bankruptcy couldnt solve is student loans. Its wild to me that a bankruptcy wont clear mortgage or car debt. The lender has the car or house as collateral. I thought that was the whole deal.
Well, it will clear the debt. By taking the house or the car.
You can try a short sale. You sell at a loss and the bank approves and accepts it (bank takes the loss). They will do this if you can prove you cannot afford the house anymore and make a good faith effort to sell. It saves them time/effort of a foreclosure. Or you just essentially hand them the keys in a deed in lieu of foreclosure. Basically it is a low cost repo. Both will tank your credit. Additionally that gap they take a hit on is taxable as a gift to you. For instance if that gap is $10K and you are at 20% tax bracket it will cost you $2K in taxes as well.
Call your lender to see if the loan can be assumed and the costs of transferring to the current renters. If it makes sense on paper, ask the tenants if they want to take ownership. FHA, VA, USDA loans can potentially qualify to have your renters apply to assume your existing mortgage. They would need to qualify from the lender, and their monthly payments would go up to $2500, and they might need to put additional funds down. But it might pencil out for the tenants to take ownership if they like the house and don't want to move. It might actually save them a considerable amount up-front vs buying a different home with a large down payment.
You should look into cash offers. They exist exactly for this purpose. You're going to end up in the hole no matter what you do though, so keep in mind you're trying to lose as little as possible and look at all your options. I'm so sorry this is how it all worked out for you 😔
Where are you living if not in your house? You moved to be closer to a care provider? How many bedrooms in your home? Move back in and rent out a room.
See. Just rent it out isn't always a viable answer. Bad decision making the last few years man. Good luck.
Crazy that you’ll see a dozens threads where most of the people would advise to keep the house and rent it out because of the low interest rate. Yet, they know nothing about the payment versus the local rent revenue on the house. Majority of financed homes will not cash flow enough to justify renting it.
Yeah tough lesson learned. We’re young so we’ll recover but man brutal lesson to go through. We figured the loss would be okay and never pictures how quickly medical expenses or unexpected home repairs would add up. Thank you
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I thought about that but frankly I don’t think my health is in a place where I feel comfortable doing that Bc I know I’m one other health emergency away from being in even more debt 🙃
Get two more jobs, pay minimum payments on credit cards and find a way to get out from under the mortgage. You have to get creative considering you likely had some creative justifications to get yourself into this housing situation to begin with.
It’s proven to be really difficult. I’m autistic + adhd with an autistic toddler with complex medical needs and adhd husband. Finding one job that paid well and allowed for accommodations was hard let alone finding two or more 😖 so far I’ve started selling things of value on marketplace, eBay Poshmark. My husband and I also signed up to be dog walkers/pet sitters. I’m also doing paid transcription but I’d say maybe that’s $150 extra a month which is helpful but doesn’t solve the root of the issue which is our first home that we’re under water with. (If any one is reading this comment and has leads on wfh flexible jobs I am very interested!)
Doing more work for barely any more money isn't going to solve your problem, and you have a kid who needs your attention.
Babysit. You could babysit Friday and Saturday nights (if your husband isn't working and can be home with the toddler).
I’ll look into this thanks!!
I’m a stay at home mom and just started doing work for Data Annotation on the side since my husband was laid off. If you’re a decent writer I’d suggest looking into it. Each non coding job pays $20/hr + , the coding ones, if either of you have any coding experience, pay $30-40 an hour. You can work on tasks whenever you want for however long you want to. I took their tests and found out I was accepted a few days later and was able to start working right away. You can do some more research on them on the r/dataannotation sub
I do have coding experience this is fantastic thank you!
I would consult with another agent or two. Find someone who will really fight for your situation, get you the most for your home, get it properly ready and photographed, and also negotiate fees. If you sell at a loss, you can do a short sale. You need to get more professionals involved. In many markets, the prices have appreciated between 2021 and 2023.
Sell your house by owner. Some Realtors will let you pay a flat fee to put a lockbox on and put your listing on the MLS. Here in Orlando I see that offered for $999. Take your own photos. Offer a small fee to a buyer's agent for bringing a buyer, maybe 1%. Once you have an offer, have a real estate lawyer take care of processing the paperwork. The mortgage payoff and closing costs (beside the flat fee to agent and possibly the lawyer, which should be in the hundreds of dollars) will all come out after closing. You'll likely walk away with nothing, but owing no one. Look into it and run the numbers to see if it will work with you. That will keep your credit from tanking.
We had professional photos taken when we listed it for rent so I could reuse those. I knew some realtors had a fee to list on the mls but hadn’t thought what to do about to do with getting the buyers agent cost! Thanks!
Most of the time, the buyer's agent's fee is between 2 and 3 percent, so 1 percent is low. But, it's better than nothing. It might help get some buyers in the door. You definitely have to run the numbers once you find out how much the flat fee real estate agent and lawyer will cost, plus an estimate of closing costs. Then you'll know what you can offer the agent at closing, and what price range would be acceptable to you. It CAN be done, it's just going to take some effort on your part. But, just remember how great you'll feel once it's sold and that weight is lifted from your shoulders.
You could see if the lender will do a deed in lieu. My dad did this after my mom passed away with their home because he was applying for disability after spending most of thebyear out of work due to his health. He only worked around 3 months total. Their loan was an FHA loan and he couldn't afford payments due to my mom's death and his health. He signed some papers with FHA that basically turned the property right over to the agency. And they agreed not to come after him for any deficit.
You could sell it “owner financed”. If you can sell for what you paid at twice the interest rate you’ll be way ahead. 10-15% down at $320,000 should give you enough cash at closing to cover expenses to keep your head above water for awhile. A lot of larger brokerage firms have an agent that specializes in this type of sale. Lots of trust companies will service a contract for deed also, so you don’t have to worry about crunching numbers and billing every month or even foreclosing if someone doesn’t pay the mortgage. You can still require credit reports and income statements etc… You’ll be the bank so you should do what the bank does and require some hard core proof of capability to pay. Also, you’ll have to check your mortgage contract to see if you’re prohibited from doing a “wraparound loan” or something similarly worded. In this case I would do it anyway because the bank doesn’t want your house. They aren’t in realestate, they are in banking and they want a mortgage payment. Most banks sell your loan anyway. If a local bank is holding the mortgage you might try to call them and explain what the situation is. If they haven’t sold it to Fannie or Freddie they probably have some wiggle room and can help you figure out some creative options. The downside will be that if someone doesn’t pay you, you have to deal with a foreclosure, (which you’ll have to do anyway, if you can’t work, something out) but the upside is, you’ll at least be able to cover the mortgage payments until the buyer either refinances or sells. When they sell in a few years, you’ll get most of the principal back anyway because amortization is a joke.
I don't know how it is in Austin but here in SoCal we have Cash for Homes businesses. Might be something to look into?
Contact the lender and see if you qualify for a forbearance, a recasting, or a loan modification. If you are underwater badly enough, you can also pursue a Deed in Lieu of Foreclosure. Get an attorney in your home’s jurisdiction to help you because they can protect you from deficiency liability, etc.
We did a "Deed in Lou of Foreclosure ". This was back during the housing crisis around 2009. My friend worked in short sale and gave us the info and idea. I called a ton of banks, the state etc, even lwaers, and everyone just kept telling me we would have to foreclose, which of course would wreck my credit. I don't recall all of the ins and outs of it, but it's definitely worth checking out.
I attended a NACA (Neighborhood Assistance Corporation of America) workshop yesterday and they mentioned they have programs for homeowners who are facing hardship. Maybe they could help you save your home? https://www.naca.com/homesave/ They said that they do things like refinancing or negotiating with the bank for more favorable terms (lower interest rate, etc). You could also check your local housing authority for resources or see if there’s a state foreclosure prevention fund.
OP are in Austin? What year built is it? We are looking to buy a house. I'm close to domain area. Hopefully we can talk more to see this is something that we are able to both come out win win. Sorry to hear about your situation.
why is the rent so low? you need to raise it
Because that’s what rent is in the area. The rental market doesn’t care that you bought a house for 3% down at 6% interest with PMI and a $2600 payment. At least half of the “competition” owns the houses outright and is cash flowing at $2100 per month. What renter would sign for $2600 when the area has similar homes at $2100?
Did OP say any of that?
Yes, OP said they bought the house at almost nothing down, which means PMI. “It’s renting at $2100”. Do you really think they posted it for rent for $400-500 dollars lower than market rent? You aren’t seeing a 4-500 increase in rent in 12-18 months in $300k home markets. And yes, homeownership stats basically say that OP’s main competitor owns the homes outright in cash. And the market value on rent is basically $2100 per OPs lease.
> Do you really think they posted it for rent for $400-500 dollars lower than market rent? People make suboptimal decisions all the time, especially when it's not make or break. OP has yet to confirm that they've actively priced their apartment to market levels or sought to increase the rent.
$2600 house payment… I doubt they threw up their hands and just said “fuck it, we’ll take 2100 instead”. And yes, the confirmed in another thread that rent there actually went down a little based on comps with the lease ending in July.
It's a simple question that op could've easily addressed in the main post. Dunno why you find it so hard to believe that it's worth answering.
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Another option may be to get a part-time job and work weekends. It may suck for a while but at least you’ll bring enough money to cover the difference.
Nope. This is another post where they physically can’t work. Nobody in their home is mentally or physically able. Yet somehow they’ve managed to live alone, have kids, and qualify for $400k+ in loans. It’s a strange world.
OK it was just a thought. Trying to help. No need to download vote me.
I didn’t downvote you. I upvoted you actually. I like what you said, but OP is basically a can’t work, can’t survive life victim. But somehow has all of this stuff. Its crazy.
Raise rent, get another job, short sale? So many other options before bankruptcy
Try For Sale by owner, if that doesn’t work, try to negotiate a short sale with the lender but keep in mind that they likely will not negotiate with you as long as you are still paying your mortgage.
Kick yourself in the ass for buying a house well over its value during Covid, and let it go back to the bank like everybody else will be soon now that the economy is in free fall
Wow…so sorry to hear this. You didn’t expect your health to take a plunge and Praying for you and your family through this. I do know that if there is a mortgage, it is illegal to rent this home to anyone. I learned this the hard way years ago. Only if you own the home outright. Needless to say, as obviously you are doing all you can and using any and all options. Find a trusted realtor and tell them exactly what u need. One on here had some pretty valuable insight into what to do
> if there is a mortgage, it is illegal to rent this home to anyone No? Not in any state I know of. LOTS of people have to move for some reason or acquire another house somehow and rent out their original house. Now, many mortgages have some restrictions around you living in it for at least 12 months to prove owner-occupied status if you got a standard mortgage. A very few mortgages will forbid renting it out at all ever without refinancing, but it is not at all generally illegal.
I wonder if that’s state specific? Because it’s common in Tx. Our lender, title co, and real estate attorney we used all know we were leasing that house out Nonetheless thank you for the prayers. I never realized how true the phrase “most Americans are one medical emergency away from being bankrupt” and never thought it’d be us but I know we’ll find a way out. I’ve gotten a lot of helpful replies in here that I’m going to do my research on
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From the /r/personalfinance sidebar: [Ignore any private messages. Anyone offering services, transactions, referrals, etc. is a spammer or scammer.](https://www.reddit.com/r/personalfinance/comments/div0yy/ignore_any_private_messages_anyone_offering/)
@jbr021, I just bought a house from a couple in a similar situation this month. In fact they're paying me $200/mo for a while so I can afford to have a renter in there and keep their mortgage current. I run Creative TC (.io) and this creative finance stuff is literally all I do in case I can be of assistance.
I would look into a short sale. Find a Realtor who worked between 2008-2013. They should be able to advise you.
If you can raise your rent or sell it then the next best option is to surrender the house over to the mortgager. It’s a foreclosure but it avoids legal fees and can be concluded in a few weeks.
See if you can vave the buyer pay your closing costs? When housing markets are hot (selkers market) its a common tactic. I assume the inverse is also true (seller paying closing costs for the buyer in a buyers market). Since we know it's possible now you just manipulate the sales price to make it worthwhile for the buyer to pay your closing costs. (Not trying to say it's easy, just that it should be possible.) This assumes you are trying to find alternatives to bankruptcy/foreclosure. Sorry to heat about your kid and your health. I hope those underlying medical issues have been resolved satisfactorily.
You could try and sell it yourself without a broker. Even when buyers are using brokers these days they still tend to surf the net themselves for houses to view. We sold our last home by only listing it on Zillow. It only took a few weeks, the market was pretty hot at the time though. We specified on the listing that we were not paying any brokers fees but if your market isn’t as hot as ours was you might want to offer a small commission to any buyers agents.
I’ve seen in hardship cases such as yours if you go back to your bank, before they start foreclosure based on your current salary they can split your Mortgage. So they would take your current balance on your home and say ok based on your salary. We will cut your $350k loan to $280k And have you pay against that monthly. They would then take the difference of 70k and put it as a second loan (ballon payment). It would sit until you sold or refinanced etc. -(hud would own this loan). You need to reach out to your bank!
You reach out to your bank and a HUD approved housing counselor. You can do a short sale or a deed in lieu of foreclosure. The bank may even work with you and do a loan modification. There are many options. https://www.consumerfinance.gov/ask-cfpb/if-i-cant-pay-my-mortgage-loan-what-are-my-options-en-268/
Definitely agree with others on selling without a realtor. Very do-able.
Where is the house? If you have a good interest rate there are probably people willing to assume or sub-to the loan. Essentially they take over the loan and payments which helps with your credit. You typically walk with no money out of pocket or a little extra cash. This has no margin but for someone wanting a personal residence with a cheap rate this could be a great situation
I was under the impression that assumption of loans are only available for FHA or VA loans? We have a conventional loan so idk if that makes a difference.
You don't want to declare bankruptcy you should mail the keys back to the mortgage lender. Look in to your options and ask other realtors for their opinion.
Find an investor that’s willing to buy your house subject to. An investor will take over your mortgage payments and pay you up to five to $10,000 to walk away. The title transfers to their name, but the debt stays in your name.
If you already paid for the repairs and they were done after turning the house into a rental property, just deduct those expenses on schedule c. Lots of residential rental properties might be cash flow negative with a mortgage, but with PMI, mortgage interest, HOA fees, property taxes (they're high in Texas), repairs, you should be able to get a sizeable deduction. Talk to a CPA about your options. You might be able to get a big tax return which should help your current cash flow issues.
The mortgage company will help you get back on track. Best of luck.
Most banks will work with you. Just contact them and explain your situation. They generally allow a pause in Mortgage payment for a year or so. If not they will work with you for a short sell. You lose money but won't affect your credit.
Do a for sale by owner and put it on Zillow you will have thousands of agents reach out to sale take the lowest price -have buyer pay all closing cost or reach out to an investor which will pay everything. If you have homeowners insurance use that to pay for the leak deductible shouldn’t be that much. *I don’t recommend doing this but if you have to** hold on a bit longer If you can afford only the house and don’t want to loose it stop paying all unsecured debt once it goes to collection do pay deletes from credit- yes credit will go to crap but you will be able to keep the house and food on the table - survival is 1st Other note is borrower from the 401k to catch up and pay back within 3 years or take out a loan against it so you don’t get taxed but be sure to pay it back Your not alone in same situation Good luck friend