Confession from a reader: "I was in denial...I may be an FB myself"
Now here is my reply:
Thanks for the e-mail.
How much do you think you can make at a new job? It looks to me like you need to clear 10k a month after taxes to be able to afford things as you currently have them (4k mort, 3k other expenses puts you at 7k, plus you need to keep saving and pay off other debt). Do you think you will be able to get a job that is going to pay you close to 180-200k a year? If not, I would look at dumping your house as fast as possible.
If you have been reading the blogs, then you know about the people that keep 'pricing at the market' and riding things down. I'm by no means an expert on the (xxxxxxx) market, so I don't know what other properties are going for. If I were you, I would make sure that my property is BELOW the others, and get it sold. Even if you have to come out of saving a few grand to get it done, you will make it up by not having a 4k mortgage anymore.
That 4000 a month mortgage payment is a lot. Not to mention that you have a wife and baby on the way. Even if you keep the place, it sounds like you are going to have to work all the time to afford things as you currently have them. That means not very much time for the wife and kid.
Just out of curiosity, what kind of mortgage do you have on your property?
Feel free to ask any other questions. I really appreciate your honesty as I know it is hard to admit when you might be in trouble.
Also, would you mind if I spoke about your situation on the blog. I will NOT use your name/company/location or any other information that would make it attributable to you. I'm not interested in 'outing' anybody, just helping other people see what can happen to people when things don't go as planned (fall out with job).
Thanks for the e-mail and for reading my blog. I hope this helps you some.
And their reply:
(Sent a quick 2nd e-mail)
A couple more things, too: we bought the house in August when we thought we were set, but we had no back-up plan. Also, we have no prepay on the mortgages.
(There were some other e-mails that went back and forth, but these contain the bulk of the information needed for your constructive feedback.)
There are a couple of points I want to make here. As you can see, this person's major fault was NOT having a back-up plan. The other major thing I want to get across to people is this: many facets of the real estate industry (title, escrow, broker, lender, etc) are commission driven on some level. During the past few years, lots of these people were making lots of money. Many of these people took on mortgage payments or other debt loads that assumed the money would continue for long periods of time. As you can see, this person ended up leaving their job in the title industry. It is not impossible to think they won't be able to duplicate the income they were making, but very seldom does a career change not involve a learning curve period where a new person is not at their peak earning potential.
Along those same lines. If you look at the last property decline in California, it was attributed to loss of jobs in the defense and construction sectors. If people don't have jobs, they can't make mortgage payments. Well, what happens if the mortgage/real estate industry, which is responsible for about 40% of the job growth in California the past 4-5 years, has a slow down? What happens when all the people that ran into the industry the past few years, that were making good money for the 6-12 months needed to get a loan, hit the slow times and can't make those $3500-6000 mortgage payments? Not to mention that many of these people didn't get 30yr fixed mortgages in the first place, so they will be looking at adjusting ARMs and increasing payments sometime in the future. Just something for you to think about.
Now I want to ask you, the reader, to provide this person with some CONSTRUCTIVE criticism, words of wisdom, or other advice. They said they are interested in "blogosphere" feedback, so let's do our best and see if we can help this person!
I look forward to the comments, as does the person who is looking for some feedback.