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Not Underwater, Not above water, at the waterline

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OK so this is sort of long but it is a complicated problem and I ask for anyone who can offer some strategic insight into this challenging tangle. I just ask that responders be kind and non-judgmental. This is a difficult situation and like many who are the victims of the banking industry of last decade, some of us are even now still paying the price for their malfeasance.


I have a city rowhouse bought in 2005 near the height of the mortgage bubble for 290k and current estimates are ranging from 285k and 305k. I owe 275k on it and have put about 70k into it over the years but it still needs 20k in paint and flooring to make it appealing to buyers (carpet is shot). I have listed it on 3 separate occasions beginning in 2014 and not sold.


I am really over owning this house I want out. It is an 90 minutes away from my job and I am currently renting an additional apartment close to work, and renting out rooms to graduate students (4 of 5 bedrooms) which covers the mortgage, but comes with a limitless array of property management headaches, which I have been doing since 2006. This situation could easily continue in perpetuity, but I need to figure a way out of it. The property value is unlikely to change for several years, and constant maintenance costs are cutting deeply into the rental income; I do the IRS rental income schedule every year and genuinely am not making any actual money.


I've been considering a few options:


1. Get all of my personal things out and rent my bedroom and work with a property management company to relieve me of most of the landlord headaches and treat it for all intents and purposes as a paper asset as much as possible. I still have to pretend to live there or everything will explode apparently, so I built a non-code bedroom in the basement that I myself may occupy when in town. I may also consider working with the PM company which may be a resource in potentially getting my house sold to another investor. In the meantime I'm paying down $500 a month in principal which helps me as long as the property value doesn't go down with it.


2. List with a full-service brokerage. Very difficult route, it alarms the roommates who fear they will soon be homeless (I have it in the lease that I can sell whenever I choose). Showings are usually people who are not serious, and it's a logistical nightmare getting all 5 bedroom doors unlocked. May consider marketing exclusively to investors (the profit is substantial if all 5 rooms are rented). Price is big question mark due to ~18k commission plus transfer taxes and other fees.


3. List it myself - get flat-fee MLS, couple hundred for a photographer, and pay a lawyer. My stepfather is an licensed RE agent and offered to help where he can. I could offer 2.5% to buyer's agent and substantially reduce overall selling cost.


4. Deed in lieu, short sale, or strategic default - Yeah, the credit report (and potential court judgement). But, given that there is a profit margin between the balance and the market value (though not much) the whole thing could be a wash. Plus, I could simply collect my things and leave, and on my own time; I could provide several months' advance notice to renters, avoid costly and disruptive repairs, and not have to deal with ruffled tenants and the logistical nightmare of showings and locked doors or sleeping tenants who forgot, etc. It's getting to the point that I feel like whatever punishment I am doled out as a result of being a walkaway cannot be as bad as continuing to be handcuffed to this situation for what is now going on a decade. Even if they did get a judgment on me for 20k or so the truth is I could probably pay it.


I need some kind of option for getting out from under this house. 13 years and still underwater is too long, the status quo is no longer an option.


It's like a bad marriage and I can't get a divorce.





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I think it is a good step in the process, to be sure. Just having the separate apartment and living alone like a grownup and being close to work helps immensely. I think the property management company is the next logical step in the process, making me more and more a silent investor, while gradually pulling out my personal effects.

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I do number one. I pay a rental company to handle my townhouse I am almost at the water line on. But the difference is even though I too bought at the top of the market I don’t blame the banks. They didn’t force me to buy or offer the price I did. My situation is 100% on me.


Never rent out an illegal bedroom. That will just lead to a lot more headaches.

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I do blame the banks for what happened (that's a whole other show). As indicated the basement room is for me only so I can still claim it as primary residence. I don't need to be code just for myself, the room is locked, and I have egress if needed. I checked everything.

Edited by DiamondEye
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Walking away would create some excitement in your life. Short sale doesn't exist based on the numbers you gave. Deed in lieu would be difficult. Not impossible but, not probable. They have no incentive. I'd also say you are calculating your deficiency potentially short. I'm confident that $20K nut you are thinking you may get hit with, would be much higher than that if it went all the way to sale. Sell it and pay the difference in the short proceeds from payoff, out of pocket. It'd be much easier than having to do the same thing down the road but with destroyed credit.


Don't be a victim to the banks in the future...(I'm hopeful no one put a gun to your head when you took the loan out).

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  • 1 year later...
On 4/21/2018 at 9:47 PM, DiamondEye said:

I do blame the banks for what happened (that's a whole other show). As indicated the basement room is for me only so I can still claim it as primary residence. I don't need to be code just for myself, the room is locked, and I have egress if needed. I checked everything.

Antique thread, but for others coming along...


NEVER discount the hurdle that ANY 'improvement' that is not to code will create in selling the property.  And, where taxing entities get wind of an additional room/feature, they often LOVE to re-appraise a property, with some even making efforts to collect on the back taxes that they got stiffed on.  Then there are the jurisdictions that will REQUIRE an owner to demolish the modification that was not built to code...and pay fines for the unlicensed and not-to-code modification.

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