Sell a house at a loss or rent it out?

[ClarabelleCowFan]

Just met with our realtor today and due to the market in our area we would have to come up with a good chunk of money at closing in order to sell our home (not to mention the $5k in repairs and upgrades that the realtor recommended doing before we can list).

We could rent the home out but would still have to cover the difference between the going rate and the mortgage to the tune of $400 to $500 a month plus we would have to pay a property management company and have funds in a maintenance account.

We are a little shell shocked since we figured we would be much closer to a break even scenario than we are. It looks like we will take a bath on this house either way - a big one if we sell it now or little ones each year we keep it and rent it out.

We have no choice but to move - the Army is sending us to Georgia from Maryland in 3 months.

Anyone ever had to rent out a home they had planned to sell?

 

[Cherbear013]

We tried selling our house all last summer. We finally rented it out for two years starting in November. Hopefully by the end of 2011 the market will be better!

 

[The Mystery Machine]

Does the realtor have a short sale expert in their office?

You will still have to pay for the note however you would be done with the house. Bank will give you a loan for the difference that you pay off. However you will have a loan out there and it will affect your purchasing power on the next house.

Renting it out is certainly the way to go if you are way over. Or if you are astronomically over like in CA., people are just letting the house go into foreclosure.

If you have the cash and you can cover the delta then that is the route you should go if you want to be done with this house.

 

[golfgal]

We are renting out our old house. We have been lucky that we have had good renters for the past 3 years. We talked with a real estate agent last month to see what the prospects were and we would still take a loss so we are holding tight. I would like to sell but we don't want to take a loss either. We collect just enough in rent to cover the mortgage but with deductions on taxes we actually come out ahead so it isn't a bad deal. Even for you with an extra $500/month, you might still come out ahead in the long run. Go to the turbo tax website and put in your information like you had it rented and see what your taxes would look like this year to see if it makes sense to rent it out.

 

[DVC~OKW~96]

Be very careful with renting. If you use a management company, get referrals and be certain to check with their customers.

Renting can become your worst nightmare if you don't have a good lease, and a good management company.

 

[Carl]

Here in Texas I would recommend renting it out, because I really expect the market to go back up. I'm not sure about California. It was always too high. I don't know about Maryland. Do some research. And, as someone else said, be very cautious as to whom you rent the house. There are some real losers out there that you don't want in your property. Some people do not take any pride in their home and others actually feel like they should "get all their rent's worth out of the house." Translated, that means do as much damage as they can.

 

[joviroxx]

Be very careful with renting. If you use a management company, get referrals and be certain to check with their customers.

Renting can become your worst nightmare if you don't have a good lease, and a good management company.

ITA! I don't know what you should do as Im not all that familiar with your market, but if you do decide to rent, take the advice above. I rented a house once and it was a nightmare. Get a reputable company that will help you.

 

[JimmyPicker]

That's a tough call. Renting can cause so many headaches. Renting and still losing $6,000 a year, plus property taxes and maintenance fees, not counting any time that the house sits empty, or bad renters who tear up stuff.

I guess the answer lies in just how underwater that house is.

 

[kidshop]

If you are military I think the govt has a program to repay you the loss on your house. I know a friend was looking into it and from what I remember you sell your house take the loss and then they reimburse you 90% of the difference, so you end up with a 10% loss on the house. Please check into that with the housing office and I'm sorry I don't know more about it than that. It was about a year ago that is was going to to into effect.

Info here: http://www.usace.army.mil/CERE/Pages/HomeownerAssistanceProgram.aspx

 

[surfgirl]

I did both!

We ended up renting it for a year... tenants came with 'stellar' recommendations - however, at the end of a year, I had over $3k that came out of their security deposit. The largest being that they dented the stainless steel fridge door and it was over $1k for a new 'skin' for the door.

The upside: because I rented it for a year, when we finally sold it, we can take the loss as a ordinary loss of the top line of income (I believe ?). My accountant is working on it now.

document document document!!!!!
If you rent it, get everything in writing. detailed photos before they move in. get a good lease (I used the one from my realtor). lots of other great advice out there - search on this board.

One of the problems that I couldn't list to it sell when it was rented. As much as they were relatively clean, they had no incentive to have it picked up for a showing. I would have needed 24 hours notice and realtors don't want to do that. They had teenage boys who slept until noon daily (in college part time), so that would have been a problem with showings... After the tenants moved out, I needed to spend about 3-4 days there fulltime getting it deep cleaned and staged. Plus I had to have a few contractors there to repair problems left behind.

I hated being a landlord... because I was local, we didn't use a management company other than to get the tenant. I hated worrying about the middle of the night phone call with "we've a full basement of water".

I would just sell it. Deal with the loss and move on. The market may not be any better in a year (we still sold at a loss). If you can find a buyer now, I would go for it!

 

[Ephany]

Personally I'd sell it, I can't imagine being an absent landlord. However my friend is married to a career Navy officer and they've never owned, only rented. They rent houses through companies who only deal with military families. They're happy because their landlords understand the military needs (ie being transferred suddenly) and the landlords are happy because they have tenants with a stable income and someone to go to (the tenant's command) if there's a major issue. So far they've had very good experiences, maybe there are property companies if your area with a similar arrangement if you decide to rent?

 

[ClarabelleCowFan]

Does the realtor have a short sale expert in their office?

You will still have to pay for the note however you would be done with the house. Bank will give you a loan for the difference that you pay off. However you will have a loan out there and it will affect your purchasing power on the next house.

Renting it out is certainly the way to go if you are way over. Or if you are astronomically over like in CA., people are just letting the house go into foreclosure.

If you have the cash and you can cover the delta then that is the route you should go if you want to be done with this house.

We would have to take out a loan to cover the difference. Our realtor advised against a short sale and we don't want to just walk away from the house. DH has excellent credit and doesn't want to mess with that at all.

We are renting out our old house. We have been lucky that we have had good renters for the past 3 years. We talked with a real estate agent last month to see what the prospects were and we would still take a loss so we are holding tight. I would like to sell but we don't want to take a loss either. We collect just enough in rent to cover the mortgage but with deductions on taxes we actually come out ahead so it isn't a bad deal. Even for you with an extra $500/month, you might still come out ahead in the long run. Go to the turbo tax website and put in your information like you had it rented and see what your taxes would look like this year to see if it makes sense to rent it out.

Thanks - I'll check on the tax breaks/benefits if we do rent. I hadn't thought of that!

That's a tough call. Renting can cause so many headaches. Renting and still losing $6,000 a year, plus property taxes and maintenance fees, not counting any time that the house sits empty, or bad renters who tear up stuff.

I guess the answer lies in just how underwater that house is.

If we can get the going market rate for this area for our size house then we would have to come up with about $20k at closing.

Our realtor is with Coldwell Banker and they could handle the property management if we go that route. They do thorough background checks, credit checks and even a terrorist check before renting the property.

If you are military I think the govt has a program to repay you the loss on your house. I know a friend was looking into it and from what I remember you sell your house take the loss and then they reimburse you 90% of the difference, so you end up with a 10% loss on the house. Please check into that with the housing office and I'm sorry I don't know more about it than that. It was about a year ago that is was going to to into effect.

Info here: http://www.usace.army.mil/CERE/Pages/HomeownerAssistanceProgram.aspx

Thanks! We looked into the HAP program and don't qualify since we purchased our home 10 months after their cut off date. I told DH to call them anyway just to ask but according to their website we are not eligible.

We're just so shell shocked. There is also the slim possibility that we spend 2 years in GA then get sent right back to this area. If we knew that now then we would definitely just rent it out.

We are looking forward to either living on post or being renters when we move - we won't buy another house until after DH retires!

 

[Muushka]

I just wanted to say that I think that the housing prices are going to fall even more in the next year or more. If I had to sell a house, I would not wait. Don't mean to be so negative, but there are a lot of foreclosures about to happen in the next several months.

Best wishes in what ever you choose to do. And thank you for your service for our country.

 

[wdwfan16]

I am guessing you are in the DC area. All reports that I hear say housing will keep falling over the next year in the DC area. I would sell.

 

[The Mystery Machine]

Ouch 20,000!

I would interview more realtors as quickly as possible, for starters.

I would also go to banks, credit unions, etc. and find out how much unsecured money you can get to cover your delta. If your dh is trying to retain his credit, this is probably the way to go. Yes you are going to be stuck with a big loan however you will not have to gamble the house with renters or the market if it drops further.

As others have said if the market drops even more you are going to be looking at foreclosure because it will be out of reach to close your gap.

It is a gamble and no one has a crystal ball. However do not rely on the opinion of 1 realtor. Get more opinions and do a lot of homework.

 

[Lisa loves Pooh]

We are keeping our home b/c we will not be able to sell it.

We aren't renting it out for now--it requires work just to be a rental IMHO.
Gaining some rental income is better than nothing though if it helps with your budget. We did qualify for a mortgage at our new location without any consideration to doing anything but keep this property and gaining no income for it.

If it is reasonable for you to do a short sale, you might try that. While it is not a foreclosure and much better on your credit record--it is a credit hit and will affect your purchasing capabilities.

If you can come up with the cash difference, that is much better--

Just something to think about.

We are $70K in the hole based on current comps and that is without taking into consideration all the work that needs to be done (thus requiring us to offer it for sale even less and increasing our deficit). We are doing all exterior work to get the house ready for hurricane season and in the next year or two will do things to the interior while waiting for our mortgage balance to go down and our home value to go up until they are once again equal. In the end, these upgrades probably wont' "add" value in terms of money, but they'll add value in terms of making the house appealing to a home buyer.

If and when we do rent, we will only do it with a property mgmt company b/c we will be out of state and do not want to have a legal problem when it comes to renters rights and having problems taken care of in the right time frame.

In the meantime, we will still utilize the house for frequent visits back home and that has made the decision to hold a bit easier.

 

[ClarabelleCowFan]

I just wanted to say that I think that the housing prices are going to fall even more in the next year or more. If I had to sell a house, I would not wait. Don't mean to be so negative, but there are a lot of foreclosures about to happen in the next several months.

Best wishes in what ever you choose to do. And thank you for your service for our country.

Thanks.

The current market does scare me and I don't see it getting better anytime soon.

I am guessing you are in the DC area. All reports that I hear say housing will keep falling over the next year in the DC area. I would sell.

We're actually about 35 miles north of Baltimore but there are people that live here and commute to DC.

Ouch 20,000!

I would interview more realtors as quickly as possible, for starters.

I would also go to banks, credit unions, etc. and find out how much unsecured money you can get to cover your delta. If your dh is trying to retain his credit, this is probably the way to go. Yes you are going to be stuck with a big loan however you will not have to gamble the house with renters or the market if it drops further.

As others have said if the market drops even more you are going to be looking at foreclosure because it will be out of reach to close your gap.

It is a gamble and no one has a crystal ball. However do not rely on the opinion of 1 realtor. Get more opinions and do a lot of homework.

DH also has to retain his credit because of his security clearance. He is going to call the banks tomorrow to see what the options are.

I'm not sure what to ask other realtors - the comps are what they are. The average house in our neighborhood is on the market over 100 days so even if we sell we will have to continue to pay the mortgage after we move unless we do sell right away. We use a home buying/selling service thru our bank and have to use the realtor they assign to us.

I do appreciate all of the comments and thoughts. It is quite a bit to take in and you guys are mentioning things that are helping us figure out what to do. Thanks!!

 

[golfgal]

If you put it in perspective, $20K is a car payment really. If you don't want to rent, can you financially handle another $300/month or so for a few years to pay down the $20k? Depending on your mortgage size, that might only be a years worth of payments too? Maybe you could work in some incentive for a selling realtor that if they can get the house sold within x number of days they get a 1% bonus or something like that??

Also, is there some kind of a tax break for selling the house at a loss?? That would be worth checking into as well.

 

[Disney Doll]

I don't know...I don't think I'd be a long-distance landlord though...I see huge headaches with that scenario.

 

[luvflorida]

We are long-distance landlords. So far, so good. *keeping our fingers crossed*

We put our house up for sale four months before we moved cross-country a few years ago, and we really figured it would sell fairly quickly. We could not have been more wrong. We had it on the market for a year and did not get a single offer (and not a whole lot of lookers either).

At the end of the contract, we took the house off the market and decided to rent it out. We went back and spent most of the summer in the house. The first day that the house was advertised for rent we received tons of calls and e-mails from interested people. By the end of the day, we had it rented. Our renters turned out to be people that know my husband through business.

My husband and I are handling everything ourselves from 2,800 miles away eek, but we also have friends and relatives back in Maine that can check up on the house at any time. We're also going back in May to visit and we'll stop by to check up on the house.

It IS scary to rent (and I hate knowing that someone else is enjoying themselves in MY pool, but I guess I need to get over that) but the alternative is to have an empty house sitting there. At least the rent covers the mortgage. We continue to pay for all lawn care, pool maintenance and snow plowing.

The fortunate thing for us is that our martgage is less than what the house is worth, or appraises for. We originally put the house on the market close to the appraisal, and eventually ended up lowering our asking price $100,000. below that figure. Awful time to try to sell a house. We COULD put the house on the market for even less and still walk away with a small profit. But there is no guarantee that the house will sell.

Our tenant's lease ends in July, and we are now deciding what to do. Do we just keep renting the house out, hoping that in a few years the market will rebound? Do we put it back on the market at a lower price just to get it sold and not have to worry about it? And how do you sell a house with tenants living in it? It would not be in their best interest to have the house sell, so then you have issues with showing the house, and making sure they're keeping it clean and picked up, etc. etc. And if the tenants move out, then nobody else is going to want to live in a house that is up for sale, and we don't want to go back to paying mortgages and upkeep on two houses.

I guess I'm not much help, OP. I can tell you, as far as renting, our experiences (so far!) have been positive. As far as selling a house, I wish I could look in to a crystal ball and see what is going to happen with the housing market!