HELP!I'm pouring my heart out here, need advice!*Updated 6/12/07*

[dvcgirl]

I don't know if this is what she meant, but I'll jump in with my POV. Our house was on the market for about 4-5 months. Our realtor wanted us to go down on the price. Our opinion --- it was a fair price. So we held it. We sold it for the price we wanted.

Sometimes it's not the price of the house, it's the demand in general. I'd rather rent a house and wait for the demand to change than sell it at a loss.

I hear what you are saying. However, it totally depends on the local market. Our nation has seen unprecdented real estate gains in the past few years. Unfortunately, there are markets within our nation that have not done nearly as well. And while some of us have seen our homes double in value (or even more!), there are areas with gains in the low single digits, or even in negative terratory. Hard to believe...yes, but true.

The mid-west, to date, has not kept pace, not even close with the NorthEast, West and Southeast....that may change, but I wouldn't bet on it. Not unless you live near a city, and even then, it will take a mass migration for huge gains to take place.

Our experience has been remarkable. The house we built in NJ doubled in price in four years. We sold it in three days...and neighbors snickered at what we were asking. We had three offers the very first day...they were trying to outbid each other. We moved to Florida, and while we figured our house would increase, we assumed it would be at a more reasonable rate. We have been astounded at the increase in value here. We're up around 50% at this point in equity. In one year.

During the time that we've seen these incredible gains we have an aunt who moved from NJ and bought a house in rural North Carolina. They've seen some really nice gains in portions of NC, but she decided on a nice new house in a rural area. A few years later she decided she didn't like it there and wanted to move back to NJ. She ended up having her house on the market for a year...and ended up getting only a few thousand more than she paid for the house. She couldn't afford to move back to NJ...she was priced out. Why did she have trouble selling? No jobs...people need jobs and if there aren't any within a reasonable distance to your home...forget it. And now with rising gas prices....people will be looking to get even closer to city centers.

 

[fac]

I am with DiznEyeore on consolidating cc debt into mortgage payment, because it is
a. comparatively less risk (assuming, we are discussing on unexpected lost, rather than irresponsible spending, which they may file for bankrupcy anyway)
b. better financially.

Obviously, we can always construct hypothetical situation or real life scenario that consolidating debt may result in losing a house. Even with the following example, when in danger of losing the house, there is no reason why Couple #1 cannot borrow from CC to pay for the mortgage, or that they do not have more money in their savings.

An illustration:

Couple #1 refinances the house and credit cards into one large bill.
Couple #2 has a mortgage plus credit card bills. Their total debt is the same as that of the first couple, but they write several checks each month.

Both couples suffer a loss of some type, and they can no longer make the payments.

Couple #1 is able to pay part of the bill, but they can't make the whole thing; they're in danger of losing their house.
Couple #2 is able to scrape together the same amount, which they use to pay the mortgage. They have to let the credit card bills go, which is bad, of course, but they're not in danger of losing the house -- at least not immediately.

Of course this is the right thing to do!

Obviously, after consolidating the debt, if couple #1 were to continue to pile up cc debt, it is man-made disaster.

Can they refinance and extend the payment period but drastically increase the month payment? Then use the cc payment to build up a reserve or to make extra payment for the mortgate.

 

[NotUrsula]

I won't comment on the home equity vs. cc thing except to say that DH and I kept our mortgage as small as possible, and in doing so we paid off our 30 yr mortgage in 9 yrs. That anecdote ties in with the next simple thing I would advise you to do ...

Pay down debts EVERY time a paycheck comes in, it's an easy way to dog down the interest you pay. Pay each CC twice each month. Never pay exactly the minimum; at least round up to the nearest $5. (That's usually less than a cup of Starbucks or a Happy Meal, and it has huge psychological value.) Two mortgage checks per month for half the amount each will also cut the amount of interest you'll pay, without your having to actually find more than an extra $.39 in each months budget.

This one may seem nutsy, but it was HUGE for us. Pay for your groceries in CASH only! When families cut back on other little luxuries, they still tend to drop a lot of money at the supermarket, buying food that just looks interesting. After all, you're not eating out anymore, right, but you've got to eat? And you stop in to pick up milk and leave with 2 bags? We put the grocery money in a grocery wallet on top of the fridge, and whoever was going to the store took the wallet (there were coupons in it, too, but we didn't use them often, name brands tend to be more pricey than store brands.) The wallet was refilled every payday with the budgeted amount, and once it was gone, it was gone. We cut WAY back on what we spent for groceries every month by using this method.

Lots of others here have given very good advice, but I thought I'd mention these two because we found that they were particularly helpful, but relatively painless.

 

[DiznEeyore]

I don't know if this is what she meant, but I'll jump in with my POV. Our house was on the market for about 4-5 months. Our realtor wanted us to go down on the price. Our opinion --- it was a fair price. So we held it. We sold it for the price we wanted.

Sometimes it's not the price of the house, it's the demand in general. I'd rather rent a house and wait for the demand to change than sell it at a loss.

THANK you!! That is exactly right, even if our "resident experts" don't get it.

 

[rjthkids]

tlb, you, me and Mrs. Pete - we will write a book on how to figure the real cost of being a SAHM or a WOHM - assuming that you don't spend $4 on coffee every day as a working mom and that you might buy $4 of Playdoh you wouldn't have bothered to by as a SAHM. And we will consider the long term implications of not putting 2% into a 401k with a match, not getting raises over time, and having to restart your career should you try and go back later. Drives me nuts, that one. You should follow your heart's calling, but if its worth it to run the numbers because your heart is divided - at least use good numbers!

Sign me up for that book too! I always knew I wanted to be a SAHM mom and as soon as we married we immediately lived off just his income and saved mine, in preparation. But, really, it would have been a toss up financially I think, if my children had been born healthy. When my first was born almost 16 weeks premature, it immediately switched to a financial no-brainer. First off, by the time she came home from the hospital after nine months, there was a permanent moratorium on daycare. It was medically contraindicated because of her fragile medical condition...the only thing we could have considered was certified home nursing/baby care that would have cost 6,000 a month. There is absolutely no way it would have made any financial sense for me work. Especially given the fact that my husband gets free health care for the family, and we have no deductibles and no copays, including pharmaceuticals. My daughter's total medical bills for the first two years of life were over 1.8 million dollars and we didn't pay a single penny. So, I always say it's a good thing we planned on me staying home, given all that happened!

 

[disneysteve]

I really don't think people "get" what they're doing when they get home equity loans -- if they did, no one would ever get them!

I have a home equity loan and I think I know exactly what I was doing when I got it. I used the loan proceeds to pay off my car loan, which was higher interest and non-deductible and some student loans which were higher interest and non-deductible. The term of the HEL was longer than the loans I was replacing, but the interest was lower and deductible. By paying more than the scheduled amount, I knew I could pay it off in about the same time that it would have taken to pay back the other loans and I'd save a pretty good amount in the process. So what's wrong with that?

 

[OceanAnnie]

I hear what you are saying. However, it totally depends on the local market. Our nation has seen unprecdented real estate gains in the past few years. Unfortunately, there are markets within our nation that have not done nearly as well. And while some of us have seen our homes double in value (or even more!), there are areas with gains in the low single digits, or even in negative terratory. Hard to believe...yes, but true.

The mid-west, to date, has not kept pace, not even close with the NorthEast, West and Southeast....that may change, but I wouldn't bet on it. Not unless you live near a city, and even then, it will take a mass migration for huge gains to take place.

Our experience has been remarkable. The house we built in NJ doubled in price in four years. We sold it in three days...and neighbors snickered at what we were asking. We had three offers the very first day...they were trying to outbid each other. We moved to Florida, and while we figured our house would increase, we assumed it would be at a more reasonable rate. We have been astounded at the increase in value here. We're up around 50% at this point in equity. In one year.

During the time that we've seen these incredible gains we have an aunt who moved from NJ and bought a house in rural North Carolina. They've seen some really nice gains in portions of NC, but she decided on a nice new house in a rural area. A few years later she decided she didn't like it there and wanted to move back to NJ. She ended up having her house on the market for a year...and ended up getting only a few thousand more than she paid for the house. She couldn't afford to move back to NJ...she was priced out. Why did she have trouble selling? No jobs...people need jobs and if there aren't any within a reasonable distance to your home...forget it. And now with rising gas prices....people will be looking to get even closer to city centers.

Sometimes I think there is no ryhme or reason to real estate.

I'm sure your statements are factual. I also know rural land is at a premium in many places because of urban sprawl. Many people want to get away from it (but it's like trying to run away from your shadow). I'm sure people are considering rising gas prices, but there are many that aren't as well. Land is being snatched up and developed far and wide!

There are just so many variables that come into play.

I believe that a lot of the time, if your property is at or around appraisal value and in the range of properties in the surrounding area it will sell for the asking price. Eventually. Going up or down a little in price is sometimes a stab in the dark. It's all a crap shoot.

 

[OceanAnnie]

THANK you!! That is exactly right, even if our "resident experts" don't get it.

I'm a radical.

My realtor was surprised we wouldn't go down. I think he was surprised it sold for asking price too.

Funny thing is, I wanted to go up! It was just a very reasonable price and we had the wiggle room. I didn't tell him we wanted to go up in price. I think it would've sent him over the edge.

Selling a house is like fishing. Bait & wait.

 

[Lyn5]

Selling a house is like fishing. Bait & wait.

I think that is where the risk is, that you are waiting for the market to change in your favor, whether you are the seller or the buyer. If you have the time and money, then waiting is in your favor. You can hold out for the offer you want as a seller or you can wait for the perfect deal/steal as a buyer.

However, if you are lacking in either time or money, that is when things can become scary. Not having enough equity in your home to go a little lower for the faster sell or being stretched too thin financially to hold out for your desired selling price could lead to desperation.

 

[Lyn5]

I agree completely. There is never a one-size-fits-all solution as everybody's circumstances are unique. There are rules of thumb to use as a guideline, but there are exceptions to every rule.

I have a home equity loan and I think I know exactly what I was doing when I got it. I used the loan proceeds to pay off my car loan, which was higher interest and non-deductible and some student loans which were higher interest and non-deductible. The term of the HEL was longer than the loans I was replacing, but the interest was lower and deductible. By paying more than the scheduled amount, I knew I could pay it off in about the same time that it would have taken to pay back the other loans and I'd save a pretty good amount in the process. So what's wrong with that?

Disneysteve, you may be the exception when it comes to HELs. Some people do use them to reload credit cards and I think, at least for myself, that is where the concern is at. You may have had two fixed costs that you were paying off, a car and student loans. So, if you were done with school and not adding anything else to the HEL, you could see the end in sight. But, if you were using your HEL to cover consumer spending and kept on spending, well, that's what would be dangerous.

 

[minnie1928]

Disneysteve, you may be the exception when it comes to HELs. Some people do use them to reload credit cards and I think, at least for myself, that is where the concern is at. You may have had two fixed costs that you were paying off, a car and student loans. So, if you were done with school and not adding anything else to the HEL, you could see the end in sight. But, if you were using your HEL to cover consumer spending and kept on spending, well, that's what would be dangerous.

Disneysteve and I think alike! I have a HEL, but I did it to avoid paying PMI, which is not tax deductible. My payment is less $ (refi-d from original rate) and it's got interest that's tax deductible...so it's better the whole way around.

However, my parents spent money they didn't have and everytime it caught up with them they refi-d the house and wrapped the debt into the house. They bought their house in '68 for $19,000, lived there until January 2005 when they sold the house for $110,000. They walked away at settlement with $7000. They lived in a house for 37 years and paid virtually nothing off! Everyone, learn from my parents example...make sure you are doing things for the right reasons.

 

[OceanAnnie]

I think that is where the risk is, that you are waiting for the market to change in your favor, whether you are the seller or the buyer. If you have the time and money, then waiting is in your favor. You can hold out for the offer you want as a seller or you can wait for the perfect deal/steal as a buyer.

However, if you are lacking in either time or money, that is when things can become scary. Not having enough equity in your home to go a little lower for the faster sell or being stretched too thin financially to hold out for your desired selling price could lead to desperation.

Oh I agree there is risk involved! DH & I were in a good position. Ofcourse, we would've rented it before getting desperate.

There are options available if you hedge your bets in time.

 

[fac]

However, my parents spent money they didn't have and everytime it caught up with them they refi-d the house and wrapped the debt into the house. They bought their house in '68 for $19,000, lived there until January 2005 when they sold the house for $110,000. They walked away at settlement with $7000. They lived in a house for 37 years and paid virtually nothing off! Everyone, learn from my parents example...make sure you are doing things for the right reasons.

I am a spender, hence I am bias.
It looks to me that your parents used the house to support their life style for 37 years, not bad though. Risky may be...

Hope that they have enough saving for their retirement.

 

[crisi]

Its an economic concept called supply and demand and an economic rule "everything sells at the right price." With real estate its a little odd as each house is unique, yet people in the market for a house generally compare houses. If you are willing to wait and can afford to wait, you can often get a little more for your house - of course, waiting comes at a cost as time costs money. While you wait four months to sell, you may have four months of two mortgages, you may have four months of missed opportunity on the market. If you HAVE to sell, the four months may be the difference between selling on your own and having the bank foreclose. Four months is actually a reasonable amount of time for a house to be on the market, and I'd say you were pretty close to what your house was worth (or you got lucky and someone stupid bought your house - that happens too).

My sister and her husband got caught by the market several years ago. They built a large beautiful house. Top of the line applicances, wood floors, tens of thousands in landscaping, built ins. When they had to sell it because of a job change, they lost tens of thousands of dollars - and it was on the market for a year while they paid two mortgages. Although the house was worth as much as they originally asked - i.e. they'd spend that much building it and the granite countertops, applicances, etc added up to the list price, the market they were in didn't support that price. People living in that area who wanted expensive custom homes had plenty of cheap land to build their own expensive custom home. And very few people wanted expensive custom homes.

Any item, whether its a house, a share of stock, or a beanie baby, is only monetarily worth what you can get someone to pay for it. Thats the definition of worth.

I am a spender, hence I am bias.
It looks to me that your parents used the house to support their life style for 37 years, not bad though. Risky may be...

The real problem is they now have only $7,000 towards a new home. Most people, when they retire, won't bring in enough money to pay a mortgage and rent and continue to be able to live comfortably. I know a lot of people who retired only to take part time jobs to continue to be able to pay their mortgages.

There are a lot of people on this board who are debt shy and have mortgages paid off or nearly so. I'm one of them. My intention is to take the cash flow from the lack of mortgage and be able to put it towards my kids college (they are in Kindergarten and first grade). We already have some savings set aside for college, and some other savings marked "retirement or college - if we don't get our act together on college." One thing that I'm darn sure about, I don't want to go into my retirement years facing big bills - i.e. I don't want a mortgage or any credit card debt or loans for my kids college. I want to pay for my heat and my food and gas in my car and then be able to use the rest of my money playing golf and traveling - not working at Target to pay the mortgage. Now life is uncertain, illness or tragedy or job loss could throw a wrench into the best laid plans.

 

[disneysteve]

if you were using your HEL to cover consumer spending and kept on spending, well, that's what would be dangerous.

No argument here. I was just responding to the comment that if people understood HELs, nobody would ever take one. I think they can be a very useful financial tool, just like credit cards can be beneficial, if used properly.

 

[fac]

The real problem is they now have only $7,000 towards a new home. Most people, when they retire, won't bring in enough money to pay a mortgage and rent and continue to be able to live comfortably. I know a lot of people who retired only to take part time jobs to continue to be able to pay their mortgages.

I understand that which was the reason I added "Hope that they have enough saving for their retirement."
Basically, we need to know the whole picture, the numbers, their retirement plan, whiere they plan to live, instead of just thinking that they took back only $7000 at the end of 37 years as bad planning. Take the extreme example, a single parent supporting 4 kids, in addition of working 2 jobs, her only way of giving the kids a good education was to re-finance her home. And at the end of 37 years, she sold her house and live with her kids, it wasn't really bad planning/spending.

 

[OceanAnnie]

Its an economic concept called supply and demand and an economic rule "everything sells at the right price." With real estate its a little odd as each house is unique, yet people in the market for a house generally compare houses. If you are willing to wait and can afford to wait, you can often get a little more for your house - of course, waiting comes at a cost as time costs money. While you wait four months to sell, you may have four months of two mortgages, you may have four months of missed opportunity on the market. If you HAVE to sell, the four months may be the difference between selling on your own and having the bank foreclose. Four months is actually a reasonable amount of time for a house to be on the market, and I'd say you were pretty close to what your house was worth (or you got lucky and someone stupid bought your house - that happens too).

We got close to what our house was worth.

Yes, I understand supply and demand quite well. But it isn't a "be all and end all" type thing.

I just think there is so much more to selling a house than that. Marketing. Get the word out and people in. Curb appeal. Many variables.

 

[dvcgirl]

I'm a radical.

My realtor was surprised we wouldn't go down. I think he was surprised it sold for asking price too.

Funny thing is, I wanted to go up! It was just a very reasonable price and we had the wiggle room. I didn't tell him we wanted to go up in price. I think it would've sent him over the edge.

Selling a house is like fishing. Bait & wait.

Selling is house is a lot like fishing. And if I've had my bait out there for a year, lots of fishies swimming by to take a look, and not one nibble....it's time to think about changing the bait (lowering the price).

I actually got my real estate license in NJ, but for personal reasons. There was no way on this planet that I was going to pay a realtor commission on our house that we sold in NJ. Realtors can be helpful in some instances, but in my opinion, if you're relatively intelligent and have some spare time, there's no need for a realtor. My DH and I were both working out of our home and so we were there to show the home and we also have a BIL who is a real estate attorney and my Mom has been a real estate legal secretary for 30 years... I took to course just to make sure we were covering all the bases. I even took the licensing exam because I figured if I took two weeks out of my life for the course....why not. It's not exactly difficult or anything.

What may (and I'm just guessing...because I don't know her) have happened in the OPs situation is that they bought a new house in this rural area. They're paying PMI and so they didn't put 20% down...perhaps even rolled closing costs into the loan. Then these factories close, homes begin to *depreciate* and people get stuck. People with older homes may still be able to sell and make a profit, but if you bought a new home and put very little down you're in a tough spot. They may not be able to drop the price because they'll lose money.

Also, this plays into the suggestion of a HEL to get out of CC debt. They probably don't have enough equity to qualify for a HEL. Banks will pretty much loan to anyone these days, but it's not likely that they'll take that bet.

 

[sk!mom]

The real problem is they now have only $7,000 towards a new home. Most people, when they retire, won't bring in enough money to pay a mortgage and rent and continue to be able to live comfortably. I know a lot of people who retired only to take part time jobs to continue to be able to pay their mortgages.

There are a lot of people on this board who are debt shy and have mortgages paid off or nearly so. I'm one of them. My intention is to take the cash flow from the lack of mortgage and be able to put it towards my kids college (they are in Kindergarten and first grade). We already have some savings set aside for college, and some other savings marked "retirement or college - if we don't get our act together on college." One thing that I'm darn sure about, I don't want to go into my retirement years facing big bills - i.e. I don't want a mortgage or any credit card debt or loans for my kids college. I want to pay for my heat and my food and gas in my car and then be able to use the rest of my money playing golf and traveling - not working at Target to pay the mortgage. Now life is uncertain, illness or tragedy or job loss could throw a wrench into the best laid plans.

Your plan is much like ours. Our mortgage will soon be paid off (30 years in 12) and then that extra income will be used to beef up our retirement and college savings. We already have both but this extra income can be used to build them more quickly. We also will have no mortgage as we head into retirement. This will, as you said, allow us a great deal of freedom to enjoy our later years as we choose.

We have also the same type of college savings (college or retirement- however it is needed). We have two children (DD9 and DS20). DS has just started his third year of college. Because of the fact that we live in a college town and he chose to live at home and attend the local State University we have not tapped into the college savings yet. He works part time and has no expenses except car insurance since he lives at home so he has paid for 1/2 of the college expenses so far from his earnings. We have been able to cover the other 1/2 without touching the savings. My point is just that your savings plan for college could work out fine and that money may be available for retirement. If DS had been a more dedicated student he could have funded the entire education with scholarships. Hopefully DD will choose that route.

 

[OceanAnnie]

The thing is it doesn't sound like a stagnant location.
There is buying and selling activity.

I agree, I'd change something too. I don't know what exactly. (There are times to go down ofcourse.) I'd probably take it off the market for awhile fix it up and try later. Rather than taking a big hit.