Saturday, June 21, 2008

THE ENEMY, PART TWO: THE TOWNHOUSE

I don’t know what I was thinking. I guess I was in the same frame of mind as thousands of other Americans when it comes to homes: buy up to what you can afford and then some. It didn’t help that I had just ended a very complicated, painful relationship and the need to feel secure, to lay solid roots was strong. It also didn’t help that after ending said relationship I spiraled into an abyss of partying, womanizing, and out-of-controlness of epic proportions. At the time, the people I was hanging out with were the materialistic type, always wanting to go to the most exclusive clubs and restaurants so they could order the most expensive drinks and be seen with the richest people around. Gag…

Seriously, what was I thinking buying this behemoth of a townhouse? Four levels, 6 bedrooms, stainless steel appliances, 3,000 square feet etc...Double Gag…

On the other hand, it cost me nothing to buy it. I’m one of those suckers who fully financed the mortgage and had the seller pay all closing costs. I basically paid absolutely nothing to move in and have been paying only the interest ever since. Thankfully, the mortgage rate does not reset for another 8 years but that’s irrelevant; I’ll be gone within a year and a half.


Simplicity Meets the Enemy
If I want to simplify my living arrangements and leave this place for good I have the following options:

1. sell the house outright;

2. rent the place out;

3. sell the house through a short sale;

4. foreclose.


Timeline
The bottom line at this point is that the place is worth less than what I paid for it. I could try and sell it but will definitely lose quite a bit of money, money I just don’t have. In theory, I could also rent the place out, but I’ve done some calculations and I would still have to kick in $17K a year out of pocket just to meet the basic payments. That’s just not possible for someone just happy to live on a limited amount of interest a year starting in 2010.

It is looking more and more likely that what I will need to do it approach the lenders and try a short sale. The way I see it I didn’t really invest anything into the place and so long as the lender realizes that I will not be able to afford payments after I leave my current job, I can just hand the place over without any qualms.

Given that it takes anywhere from 3-7 months to negotiate with the lender and finalize a short sale, I’m thinking that I will get the ball rolling starting in March 2009. Between now and then I’m just going to focus on my other simplifying goals and lay the groundwork for leaving the townhouse. I will talk to real estate agents, lawyers, etc…and see if they can help me figure this out in the best way possible.

10 comments:

Jonna (aka mom) said...

Jack, I am so touched by your situation. Please forgive my forthcoming outburst of maternal instincts kicking in. But here it goes anyway:

First of all, do not kick yourself by wondering what you were thinking. When leaving a complicated relationship, it is common that one is not thinking. During times like those, one tends to live life reacting to what we are feeling as the feelings override our capacity for thinking. And so, in this aspect you were quite normal and very human. Perhaps this is a good thing? To know that you are very human?

It takes time to recover from loss and big changes in life. We can do many 'crazy' things while we are going through the process of healing and regaining ourselves. It's all part of the process. My impression is that you are coming through and are at the crossroads. You are healing. You are ready to recreate your life. This is a very good and healthy thing. And you are young, you have many good years ahead of you. So this is great news!

And Jack, I am getting the impression that you are not as shallow of a person as the materialistic people can sometimes tend to be. So…

(entering mother mode)

Personal fulfillment will not be found in partying or womanizing. In the end, unless you are truly shallow, you will be left feeling very empty and alone. And you will run the chance that you will drink those feelings away. I would consider this very deeply and question if this is where you want to be.

That is not to say that parties and woman are not a good thing for a young man to have. If you would like to go party, do so, have a cocktail, but just one or two. And a young man is not likely to go off to live like a monk, the want for women will be there, so find a woman, but just one.

There is much to be said for the concept of quality over quantity. Through this course of self discovery, I think that you will find life much more enriching.

It is very good that you are able to see the out-of-control aspect of your post relationship behavior. There is always control of some type in one's life, the best form is that of 'self-control'. Without that, eventually one will face consequences and there will be something bigger than you taking control because you didn't. Please wisely ponder this, young one, you do have the potential for a very good life ahead of you.

And with that over with…. The townhouse. I truly don't know what to say to that other than yes, you got yourself into a pickle and need to figure out how to get out of it. Researching the situation through those resources that you mentioned is your wisest course of action at this point. This might be very tricky to get out of and not find yourself in court with a huge judgment slapped on you. Plan wisely for the sake of your financial future.

I have been reading on the blogs from your blog list (Green living, sustainability, simplicity, downsizing the heck out of it all). This is giving me a very good sense of the direction in which you are wishing to go for your lifestyle. I commend your thinking and I encourage you to continue forming this vision and then pursue it. Very good choices.

I had a thought that you might like…. Save the antiques and ditch the modern stuff. With a small efficient 'green' home, you could live quite elegantly using antique furniture to enhance the atmosphere of your future home! Living simple doesn't have to mean living in something that looks poor… it's just us poor folk who do that!

Regards to you, Jonna

P.S. I do have an ornery side. I'm not always nice. I am still extremely tickled and amused that my first ex-husband bragged that his tiny $50,000.00 house was worth $140,000.00 and took out a second mortgage and is now so trapped that he can't get out. He sleeps on the couch with his wife because the home is too small since they had children. Meanwhile, I paid attention to the real world and I got out in time and walked away with a profit. Grin! (oh I know… so mean)

Jack said...

Jonna,

Thanks for your message. Nothing wrong with a little maternal nourishment when things are wild and complicated! Definitely appreciate it.

On going wild, I think I'm only now coming out of that phase, one where I kinda just hunkered down and did any number of things just so that I didn't have a chance to look around and feel anything. Maybe that's the part of the journey. Things wouldn't look as clear for me now if I hadn't gone though that phase.

As for the townhouse, I definitely get you on the antique stuff. I think the problem is that I'm just not sure where I will be in the next five years or so. Stuff -- any kind of stuff -- ties you down and keeps you from moving forward. At this point in my life, I value mobility more than anything else. Check out my post for today; the idea is to give this stuff to friends. Who knows, maybe when I find what I'm looking for I will more than happy to get my antiques back. :)

Take care,

J

anita said...

Six bedrooms? Wow. Why not rent a couple more out? Surely there are other singles in your area that would like to live in a great place like yours! At least that would help you with the payment for now. I mean, I don't know what you paid for that house, but I don't doubt that it's worth less than what you owe, given today's real estate market. Yet, on your salary, as a single man, I'd be willing to wager you can be creative and come up with some good ideas. As for giving the furniture away...noble, but really? when you have so much debt to pay off?

Jack said...

anita,

Way ahead of you. Currently have 2 tenants and thinking about adding more. Have to consider it carefully (would have to decrease rent on the current tenants and it would actually increase my tax liability) but I think I can do it in a way that is useful. As for furniture, will try to sell some, though if friends and family actually need anything they have first dibs...
J

Jonna (aka mom) said...

I was just thinking about wild phases. And grinning. Gosh life was fun when I was young. Now I'm so well behaved that my adult children are shocked when they find out what a hellion I was. Oh well, I had to grow up some time. I wouldn't want my whole life to have been wild, it gets old after awhile.

And I hear you on the stuff. I'm still getting rid of things and have a list of stuff that I am going to get rid of. I'm not going anywhere but I don't want it tying me down if I do someday.

Best wishes,
Jonna

anita said...

Sounds like you're thinking things thru carefully, good for you! I never thought about the tax liability...good point.

Fifty-One-Fifty said...

Jack, how much does it cost to rent a room?

Jack said...

Fifty,

Depends on the room. Currently renting a room to one guy for close to $1k a month.

Kel said...

6 bedrooms!? what were you thinking?...

Anonymous said...

I'm sorry, Jack, but your short sale will not be approved. Short sales are for homeowners who are already in default on their mortgages and have no savings and no way to refinance. You have savings. You will have to provide your 2 year tax returns, W-2, 2 Months Bank Statements, Hardship letter, and Personal financial statement as part of the shortsale package. Unless you intend to hide your savings somewhere, which is technically fraud, your short sale isn't going to be approved. You can afford the house. You have options. You have a legal, not to mention moral obligation to repay your loan. I'm sorry, but you made 300K a year and you couldn't come up with a way to refinance your mortgage? What were you doing with all of your money?

On another note, I hope you don't think public interest lawyers have lots of free time. A lot of them work the same hours that you did at the big firm for 1/8 of the pay.