Would you keep trying to sell a house or rent it out? UPDATE!

[ameraumi]

I could really use some input in what you would do in my situation.

Background:

I purchased a new home last year. Because of Fannie Mae regs, the lender said it would be better for me to refi the old home to buy the new home outright. Old home has a mortgage, new home is completely paid off.

I have had the old home on the market for 6 mos now. It has only had a few showings and a few lookers at Open Houses. It is priced right for the area, the only downside is my bathrooms need updated and I am not willing to sink big money into them knowing I will not re-coop it. As it is, I am going to take a hit on it because of the renovations we did do and the market is still slow to recover. House has appraised at $140K (4 br, 2.5 baths, full basement (1/2 finished), 2 car garage). Balance of mortgage is $110K. Houses in my neighborhood are listed between $134k-$154K and generally on the market 9-12 mos.

The agent I listed with has not done a lot to really promote the house. I made the mistake of mixing business and friendship, as she was a former daycare client of mine. If I relist, it will be with another agent.

I have thought about renting it out and seeing if the market is better next year. If I rent, the rent would have to be about $800/mo, which is the higher end for my area. Granted, most homes rent for $550 and are smaller and no garage. My mortgage pymt is $600/mo, taxes $200/mo, ins $60/mo. I would have to pay ins OOP.

Would you continue to try and sell the house with a new agent or would you go ahead and try to rent it out and see how the market is next year?

 

[Beckypooh1972]

Wow! It sounds like you made a smart move to to buy the new house free and clear. I guess only having the one mortgage on the old house you could afford to wait for the house to sell with a large profit. I don't know why you wouldn't just lower the price - make it irresistible to buyers. Renting is dicey -new renters could cause further wear and tear on the property... I'd price it to sell if it were me and walk away knowing you made out like a bandit on the new house.

 

[ameraumi]

Once you figure in realtor fees and any closing costs, it most likely will not be a huge profit. One house recently sold for $125k and it was slightly more updated than mine. Even at that price I would not walk away with any money after you pay off the mortgage, pay realtor fees and any closing costs. But I would be free of the house and be able to save what I would have been paying monthly.

 

[crisi]

I'd fire sale the house for $100k-$110 - getting a home equity loan against your current house and take the loss.

To me, it wouldn't be worth the bother to rent the home and be a landlord - that is a lot of work. And the emotional burden of having the home on the market, plus the $850 in month expenses, would make it worth it to me just to dump it.

With your current new home paid for, I'm assuming that you can afford the loss and that it wouldn't be a huge deal.

 

[Marionnette]

I could really use some input in what you would do in my situation.

Background:

I purchased a new home last year. Because of Fannie Mae regs, the lender said it would be better for me to refi the old home to buy the new home outright. Old home has a mortgage, new home is completely paid off.

I have had the old home on the market for 6 mos now. It has only had a few showings and a few lookers at Open Houses. It is priced right for the area, the only downside is my bathrooms need updated and I am not willing to sink big money into them knowing I will not re-coop it. As it is, I am going to take a hit on it because of the renovations we did do and the market is still slow to recover. House has appraised at $140K (4 br, 2.5 baths, full basement (1/2 finished), 2 car garage). Balance of mortgage is $110K. Houses in my neighborhood are listed between $134k-$154K and generally on the market 9-12 mos.

The agent I listed with has not done a lot to really promote the house. I made the mistake of mixing business and friendship, as she was a former daycare client of mine. If I relist, it will be with another agent.

I have thought about renting it out and seeing if the market is better next year. If I rent, the rent would have to be about $800/mo, which is the higher end for my area. Granted, most homes rent for $550 and are smaller and no garage. My mortgage pymt is $600/mo, taxes $200/mo, ins $60/mo. I would have to pay ins OOP.

Would you continue to try and sell the house with a new agent or would you go ahead and try to rent it out and see how the market is next year?

Once you figure in realtor fees and any closing costs, it most likely will not be a huge profit. One house recently sold for $125k and it was slightly more updated than mine. Even at that price I would not walk away with any money after you pay off the mortgage, pay realtor fees and any closing costs. But I would be free of the house and be able to save what I would have been paying monthly.

It's not a good idea to become a landlord by defalt if you can avoid it. There are a lot of hidden costs in being a landlord that you may not have considered. All appliances that come with the rental will be your responsibility to maintain and repair quickly. You will need to make sure that the driveway is plowed in the winter and the lawn is kept up in the summer. A bad tennant could leave the place a wreck, not pay their rent, fight you on eviction and even steal the appliances when they depart.

If you do turn to renting the place out as a last resort, you need to price it competitively and abandon the thought that you can somehow recoup your mortgage payment and taxes on the place. Any desirable tennant who can pay that amount for what you are offering would be smart to just purchase a home outright.

If homes in your area average 9-12 months on the market and yours has only been on the market for 6, then you are still under the mark. Spring is usually the busiest time in real estate, so you might get more lookers now. And you might have to consider dropping your price if you really want to be free of the house. People are going to see bathrooms that need to be updated and in their minds, it's going to drop the value of the house by a considerable amount.

I agree with crisi. Fire sale the house to get out from under it. Use the equity in your current home to finance the difference and be done with it.

 

[disneychic2]

My niece and her DH couldn't sell their house for a year so decided to rent since their new home was built and they had moved. They got burned big time. House was furnished and the renter split in the night with all the furniture and let a cousin move in. No one was paying rent or utilities. Big nightmare.

I would sell the house. Either fix up the bathrooms (doesn't matter if you recoup, you're already ahead with your new home paid for) or lower your price. Your house will probably sell quickly if the bathrooms are nice. You don't have to spend and arm and a leg. Just make them pleasing.

 

[jedijill]

My house was on the market for a year (I moved to another state for a job) and I couldn't compete with the foreclosures on my street. I have been renting for the last year and a half. I hired a property management company a year ago and its been a godsend in a tough situation. If I could sell and walk away with no loss I would be thrilled but I am choosing to wait out the market. I am lucky I have a good tenant who is treating my home well and the property management company takes care of the small repairs and rent collection, etc. Not the ideal situation but better than loosing my rear end or walking away from my mortgage.

Jill in CO

 

[Swimalie]

Keep in mid if you are renting out the old house your insurance might change. It would go from homeowners to one where you are not living in the house. Chances are, the price per month would go up on it as well.

My next door neighbors had to move (military) and rented out their house. The new people refuse to mow their lawn and only occasionally get some teen in the neighborhood to do it. The garden in the back is gone and covered up by grass and weeds that they have let over grow. The homeowner, who Im friends with, said she's scared to see the inside now. They have already gotten a few HOA notices about the outside. Renting out is a lot bigger deal than most people realize.

 

[Lisa loves Pooh]

Tough call. While it sits empty, you are not having much luck. Sometimes, lived in homes do better.

You could try renting it and then while rented, list it for sale towards the end of that lease. That can get sketchy with renters, but they may be able to help you out for some incentive, like a slight discount in rent.

We have our home rented out, but the finances are much more dire than your situation. We simply are unable to sell it and the only literal option at this time is a foreclosure. So we are biding our time by getting that balance paid down. In any case--we have done whatever we can to make rental easy for our homeowners.

We pay for many services, except lawn. For that, they just took over the lawn service we had used. If they didn't, we would have negotiated more rent and we would have paid for the service.

Our goal was to keep our home in excellent condition after having the exterior refurbished until the market improves or the home is no longer upside down.

We did our due diligence and miraculously ended up with fabulous renters. I kind of hope they stay for a while.

 

[jedijill]

Keep in mid if you are renting out the old house your insurance might change. It would go from homeowners to one where you are not living in the house. Chances are, the price per month would go up on it as well.

My next door neighbors had to move (military) and rented out their house. The new people refuse to mow their lawn and only occasionally get some teen in the neighborhood to do it. The garden in the back is gone and covered up by grass and weeds that they have let over grow. The homeowner, who Im friends with, said she's scared to see the inside now. They have already gotten a few HOA notices about the outside. Renting out is a lot bigger deal than most people realize.

Good advice. My insurance went from about $350/yr to $650/yr for fire insurance. The insurance is the same if it empty or rented out which seems silly.

This is where the 10% of rent I pay my Property Management company is worth its weight in gold. They screen the tenants, do inspections, and make sure that the house is being kept up....much easier for them to do it than I can from 3 states away.

Jill in CO

 

[DawnM]

Relist with someone else and tell your friend you are sorry, but you need the house sold.

If houses are listed for the prices you gave, what are the properties actually sold for?

I you can come down to $120K or less and promote better, you might move that more quickly.

I wouldn't rent. I just don't have it in me to deal with the hassle and the fear of being taken by someone. I also wouldn't pay each month to rent it out.

Dawn

 

[ameraumi]

As for my insurance, it has already gone up. It is considered a vacant property and it will go down and have better coverage if it were rented.

The only other comparable houses that have sold are foreclosures and those have sold for $99k-$109k. There has only been one other that has sold recently and that was the one for $125k.

Thanks for your input!

 

[starry_solo]

If you can't afford to keep up the mortgage on the old house, don't want to renovate the bathrooms to make the house more sellable, and don't really want to rent, have you thought about a short sale? Will the bank take it in lieu of foreclosing and absolve you of any deficiencies?

 

[crisi]

If you can't afford to keep up the mortgage on the old house, don't want to renovate the bathrooms to make the house more sellable, and don't really want to rent, have you thought about a short sale? Will the bank take it in lieu of foreclosing and absolve you of any deficiencies?

She won't qualify for a short sale.

 

[Cheshire Figment]

Someone mentioned a "fire sale". How about a (large) fire. Then collect the insurance to pay off the mortgage and sell the land. Insurance costs will drop as you would only need liability on the land, and taxes would drop as it would not be unimproved land.


























This was not a serious suggestion, do not pay attention to it.

 

[volfamof4]

Sell

 

[rubato]

We couldn't sell our house for about 6 months. We threw it in the rental market. Best decision we ever made. We had a horrid tenant for the 1st year. But, for 3 years now, we've had an amazing tenant. We get $1250 a month for our 3 bedroom, 3 bath, 2 car garage house. It's in a college town, which makes a big difference. The appliances were all new going in to this, so they're still great. Other than a few minor repairs, no out of pocket expenses. We have a property manager and she gets $100 a month to take care of everything. We're just going to wait out the housing market, and put it back up when things get better.

 

[Colleen27]

Being a landlord is stressful even with a good tenant and the ability to handle repairs ourselves. I wouldn't recommend it if there is another option, considering that you'd still be losing money every month and risking damage to the home that you'd have to repair before a new tenant or relisting. We just sold our old house after renting it out since May of 2009 and although we were about as lucky as we could be as landlords - only one tenant, a nice guy who paid on time, took good care of the property, and intended from the start to buy it as soon as he could get a mortgage - but it is a HUGE relief to finally be done with it.

In your shoes, I'd find a new agent and relist at a lower price just to have it done with. We didn't have that option because we moved at the bottom of the market and owed substantially more than the home was worth, so we had the choice between renting it out until the market rebounded a bit or letting it go to foreclosure. If we'd had the option of selling, even at a loss, we'd have gone that route instead just to have it done with rather than dragging out so long.

 

[Kay1]

You'd need to ask yourself if local salaries would support the amount of rent you'd want to charge.

Best of luck.

 

[tlh0726]

Sell it. It is not worth the possible problems that can occur.

It really sucks when tenants don't pay, you watch them destroy your property, and there is basically nothing you can do until the court system makes them leave. And even when you are awarded a judgement you are not guaranteed to receive one dime that is owed to you.