22 January, 2011

Preparing to Move

Our move needs to encompass three major phases:

(1) Get rid of our extra stuff
(2) Move the remaining stuff.
(3) Get rid of our house

Let''s talk about (3) : Get rid of our house.

We have a meeting with a real estate attorney on Tuesday to go over our plan to return our house to the bank "deed in lieu". Basically, this means we walk away from our house.

Our house is worth a few thousand dollars less that what we owe on it. We are hoping that the bank will agree to an arrangement where we simply give it back to them. We do have a second mortgage though and we don't know what would happen with that.

We could simply let the bank foreclose on the house and, in the intervening months, bank the money we save by not paying the mortgage.

We could also try a short-sell with the banks' agreement. This is where we sell the house for less than what we owe on it.

We aren't sure what the best course of action is in our situation and this is why we have sought the advise of legal counsel.

Our initial plan for this house was to live in it for the entire span of the 30 year mortgage. At the end of the 30 years, the house SHOULD be worth US$1,500,000 (at the rate things were increasing when we bought the thing). Now that plan is up in smoke. At the rate we're going, we will pay some $1,500,000 for a house that might be worth $800,000. Live and learn.

The economics of renting are starting to win out over the economics of owning right now. If we rent a house slightly smaller than the one that we are in now, we can come out almost $600,000 ahead than the track we are on now. The number vary widely based on investment rates and house resale values. We have run reasonable numbers showing anywhere from an upside of $1,200,000 to a downside of $23,000. Based on those numbers, renting seems like a solid bet with much more upside than downside.

I think that I will miss the security of owning my home. I don't know if the flexibility that comes with it will offset the insecurity of not being able to renew my lease if the owner decides to sell.

I am not afraid (Isaiah 43)

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