Sunday, January 22, 2006

Confession from a reader: "I was in denial...I may be an FB myself"

I hope everybody had a good weekend! I want to share some e-mails that a reader and I have bounced back and forth. I have removed all personal and identifying information. I want to thank this person for their honesty and candor. I think this person has a very good chance at avoiding FB'dom because they did not go into denial, and are instead looking for a solution relatively early in the game. This person would like other CONSTRUCTIVE feedback for their situation. I think this person will be fine, and I want to wish them all the best. Now let's look at those e-mails....(note, I did change some of the personal/identifying information)
Dear AFB-blogman:

I was in denial. I've been reading all the mtg bubble blogs for 6 months, and I said I could handle, and I was. Now, I can't, and I may be a FB myself.

I recently exited the title industry after (xxx some issues xxx) with management, and find myself with a $4K mtg payment, another $3K in other bills, about $6K in 0% interest until May cc debt, $6K in checking, $9K in savings, $6K each in two IRAs, and a $4800 401(k) that I need to rollover. I owe $600K on the house, it's probably worth realistically $620K or so. I'm going FSBO at $640K. The property is in (xxxxxxx). I've paid the 1st and 2nd tax installments already.

I would love to dump the property and rent, while I accept a new job most likely next week, with an executive recruiter in (xxxxxxx). In the meantime, though, I will be running on fumes for the next 2-3-4 months, especially since my wife is due any day now. I am paying for (xxx some insurance xxx) for the delivery, so it's really $5K in checking. I'm wondering, though, if I should pursue a stopgap measure in the meantime. What do you think?

Some Title Company
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:

Thanks for writing me back so fast. That's a pretty accurate assessment of our situation, and I've got a pretty good lead into an executive recruiting career where the commission level is pretty high. I'm amped for the opportunity, but the learning curve will probably stand in my way in the near-term.

Yes, we want to dump the house ASAP, and right now, it's a 2/28 at 6.125% on the first, and 30-year fixed at 9.85% on the second. I have a 7xx FICO, and my wife's is around 7xx.

I appreciate your sentiment very much on the family part; I 100% agree. Absolutely, you can use my story on the blog; I'm very interested in blogosphere feedback, too. I'm a salesperson; if I can't be honest, I can't sell. And right now, I could use all the help I can. We'll make, though. I'm very optimistic.

(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.



Anonymous Anonymous said...

If it's worth $620k, then why is he listing it for $640k? Is this a subtle symptom of denial, and not REALLY wanting to sell?

1/23/2006 4:19 AM  
Anonymous Anonymous said...

well, folks like him are both responsible for and victims of bubble. 180 k salary? more likely, 70 k. He is smoked. Ask him to downsize big time. What a twirp.

1/23/2006 5:31 AM  
Anonymous Anonymous said...

"well, folks like him are both responsible for and victims of bubble. 180 k salary? more likely, 70 k. He is smoked. Ask him to downsize big time. What a twirp."

Give the guy a break, man. We all make mistakes, and it takes a big person to clearly admit when they're wrong and publicly speak it...perhaps even an even bigger person to not respond directly to someone like yourself. Play nice, or don't play at all.

1/23/2006 6:17 AM  
Anonymous Anonymous said...

This is the e-mailer to socalmtgguy. I appreciate all the feedback so far, and the criticism, too. It made go back and read my e-mails. I need to clarify a few points.

First off, I DO really want to sell. I failed to mention in my e-mails to socalmtgguy that I am offering a 3% buyers' agent commission. My wife and I hit 34 open houses in the general vicinity yesterday with flyers. We have three offices which we are distributing flyers to for their weekly meeting, and an ad in the Pennysaver for the next four weeks starting this Wednesday. I priced a bit high so I pay the commission, if I have to. We go straight FSBO, I'll go below $620K.

Secondly, I got into the biz doing loan doc sign-ups. I did two for a friend this weekend. Both couples were mid-to-late 20s, like my wife and I. Both of them are option ARMs, and their current 2/28s adjust to a double payment. Both were rolling mid-five figure credit card debt into the mortgages, too. My point is, I think my situation is now pretty much everywhere in my age bracket. All our friends that own homes are leveraged to the hilt.

Third, I can't use a listing agent. Right now, in Corona, anything with under 3% commission isn't moving; and, I know too many people in the biz - I'm doing this myself.

1/23/2006 6:46 AM  
Blogger 41cadillac said...

This "Confession person" hopefully will take his new knowledge into his new job.

Not to be cruel, but I would not hire him because of his foolish financial situation. If he does not know how to run his own finances, why would I trust him in my business using my hard earned monies?

So he is lucky to have a new job with new knowledge to apply to new worlds.

1/23/2006 7:23 AM  
Blogger Silver Lightning said...

This house is probably worth alot less. I wonder what the previous buyer paid and how much he banked on the transaction? People are hesitant to reduce prices when some have run up 100% in a few years. Greed will get you. You better make some tough decisions and stick to them because it's just an investment and I deal with similar decisions on a daily basis. I've lost it all and it sucked. But you come back stronger and smarter hopefully. Cut your losers and let your winners run. There's a saying on Wall Street. #1.Never trust the analysts, brokers or the headlines. #2. Never forget point #1.

1/23/2006 8:13 AM  
Anonymous Anonymous said...

Drop in U.S. Housing Starts
Underlines a Slowdown

By Joi Preciphs and Kemba Dunham

Signs of a housing slowdown intensified as home construction fell sharply last month, and a deep-discount deal offered by a major home builder in one of its pricier markets suggested the industry may be feeling some anxiety.

Meanwhile, two other big home builders, D.R. Horton Inc. and Beazer Homes USA Inc., reported solid quarterly earnings growth, but analysts said Horton looks better positioned to cope with a downturn.

The Commerce Department reported yesterday that U.S. housing starts fell 8.9% in December to an annual rate of 1.933 million units from November's 2.121 million units. The drop may have been at least partly weather-related. However, applications for building permits also fell, declining 4.4% to 2.068 million units from 2.163 million in November. Building permits, which don't fluctuate with the weather, are considered a dependable indicator of future construction activity.

Last month's decline in home construction was led by a 12.3% plunge in starts for single-family homes, which fell to an annual rate of 1.577 million.

"As we have been talking about for some time, the market is slowing," said Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies. "Slowing is not the same as reversing course," he added, "It's still a pretty big number."

Indeed, even with the weakness seen in yesterday's report, 2005 was a record year for home construction. The Commerce Department said single-family home-and-apartment construction totaled 2.065 million units, a 5.6% increase from 2004. That pushed total construction to the second-highest level on record, topped only by the 2.357 million units built in 1972.

Despite the signs of a slowdown, D.R. Horton and Beazer Homes both reported a 29% increase in earnings for their fiscal first quarters ended Dec. 31. Horton's net income rose to $310.1 million, or 98 cents share, from $241 million, or 76 cents a share, a year earlier. Revenue rose 15% to $2.9 billion as the company closed on 9,891 homes, a slight increase from 9,680 homes a year earlier.

As it previously reported, Horton's orders for new homes during the quarter rose 19% to $3.2 billion, representing 11,463 homes. Orders serve as a barometer for future earnings as they reflect revenue the company will receive two or three quarters down the line when a home sale closes. Other builders, such as Denver-based M.D.C. Holdings Inc., have recently reported declining orders, but Horton, Fort Worth, Texas, bucked the trend by showing growth in all of its regions.

Atlanta's Beazer Homes indicated that it is starting to see softness in some regions. The company said its quarterly net income rose to $89.9 million, or $2 a share, from $69.7 million, or $1.57 a share, a year earlier. Revenue rose 21% to $1.1 billion. Beazer's new orders rose 9.2% to 3,872 homes during the quarter. That reflects increases in the Southeast, Central and Midwest regions, which were partly offset by lower home orders in the West and Mid-Atlantic regions.

Analysts think some builders will weather the slowdown better than others. "Horton is just better positioned in all of the markets that they're in in terms of the price points that they serve," said Alex Barron, an analyst at JMP Securities in San Francisco.

Though the building industry's confidence has trended downward for the past few months, recent declines in mortgage rates and improved consumer sentiment have moderated initial fears, according to a recent report by the National Association of Home Builders.

Some builders appear anxious, however. On the Web site, Centex Corp., a builder based in Dallas, is offering buyers who show up between 10 a.m. and 10 p.m Saturday at almost any new Centex neighborhood in northern California as much as $100,000 off the price of selected home sites.

Separately, the Labor Department said new claims for unemployment benefits dropped to 271,000 in the week ended Jan. 14, down 36,000 from the previous week and the lowest level in six years. The four-week moving average of new claims dropped 12,000 to 299,000 from the previous week's 311,000, the lowest level since October 2000.

Email your comments to

-- January 23, 2006

1/23/2006 9:18 AM  
Blogger Rob Dawg said...

First, I'm not so critical about the lack of plan b. Buying a house is always a "stretch." There's that cold gut feeling for a long time. A leap of faith if you will. Rather, I'm scared of "2/28 at 6.125% on the first, and 30-year fixed at 9.85%" because it violates the rule of "buy a house at terms you can afford." Those terms are not affordable. The goal here is to reduce monthly expenses. There's really no equity to "protect" so don't even think about that. Getting out with your entire skin is a bonus at this point. Focus on not having any more chance of getting further skinned. Selling the house for anything over $580K gets the job done. Renting the "same" house takes monthly housing down to what? $2500 plus utilites? At that the ccard goes away in 4 months, and you'll have everything else clear in a little more than a year. I'd bet you can get a signature loan after closing to consolidate your "losses" for 8% which is less than you 2nd fixed 9.85%.

1/23/2006 9:20 AM  
Anonymous Anonymous said...

First of all, kudos to the FB for recognizing he has a problem and having the nerve to do something about it. Recognition of a problem is the first step to solving it.

Second, having just sold a house last year in a decidedly less hot real estate market than SoCal, I committed a cardinal sin: Overpricing a FSBO. Lots of interest was expressed but not a single offer. We finally listed it with an agent at the appropriate price and the house sold in less than a week with virtually no effort given by the agent (but I digress). FB needs to really be certain he is going to get his price before putting it on the market above the comps or he loses that new listing buzz. Also, people who buy FSBOs want to save the commission too so they will virtually never offer the asking price. We too were willing to pay a buyer's agent commission when we had the house FSBO, but no agent was interested in showing the house. Be careful there too.

In sum, I think FB recognizes the problem but is still in a dreamworld about the value of his house/how to sell his house.

1/23/2006 9:58 AM  
Anonymous Anonymous said...

Ok, gang, it's clear the man is trying to sell the house. Let's stop advising him to sell it. He IS trying to sell it. He's said so at least three times now.

I'd like to offer a few thoughts for the future. Not knowing the age and health status of the self-admitted FB, I offer these blind:

Do you have friends in your area? Real friends? Even one you can admit your situation to? Because if you are lucky enough to have any kind of a support system close-by, your wife is going to need it in late-preganancy and after the baby comes. Please try to find someone who will come and spend time with your family at night. You and your wife are going be to exhausted at a time when you are trying to build up a new sales base. A friend who is a night-owl and is willing to stop by from midnight to 2am--even that little bit--may just save your sanity during the first 8 months of your child's life. Or maybe someone is an early-riser and will come by from 6-8 am to help deal with the wreckage of the night before.

Also, if you have the strength, after selling the house and getting that off your plate, please consider getting a second job for about a year. Not a professional gig, a down-and-dirty one where as long as you do a good job, no one expects you to hang around forever. If it were me, I'd try to get a job at a sports bar or working-class dive and offer to hand out beer and mix drinks on the slow nights when none of the career bartenders want to work. Most bars keep a list of "on call" bartenders...even picking up two shifts a month would change your situation. Avoid upper-class places. Working-class people TIP because they know what it is to need a dollar. If you look like hell and are asleep on your feet, tell the truth: "Had a baby."

I mention the bartending because that was MY second job when I needed to dig myself out of credit card debt. I was exhausted and looked exhausted and when customers asked my story, I said, "Spent more money than I had. Now I have two jobs." It was temporary. Things are great now. Now I save money every month.

If bars are not your thing, try doing stock work at one of the warehouse stores at night. Maybe two shifts a week? Management LOVES to not have to pay benefits.

However, this is key: don't leave your wife solo with the baby while you go to work unless you get lucky and get an "easy sleeper," i.e., the one baby in about 50 who after six weeks of age sleeps for extended periods of time with no problem. Unless your wife is made of sterner stuff than most humans, she will feel too alone if she has to spell the whole night with a new baby by herself.

That's my advice. Try to get help from friends. Try to get tired from working two jobs. Remind yourself this is temporary. And move on to more secure times!

Congratulations on your impending arrival.

1/23/2006 10:02 AM  
Blogger David said...

Unless you family will be earning more then 120K ( in the near future) then I would sell now even if it means a loss of 30K on the house.

I assume a decent rental property can be had for 1.5K a month.

1/23/2006 10:30 AM  
Anonymous Anonymous said...

Anonymous said...
Ok, gang, it's clear the man is trying to sell the house. Let's stop advising him to sell it. He IS trying to sell it. He's said so at least three times now.

Long time lurker. First post.

This advice is SPOT ON. I have a young child and I'm starting my own biz. It is tough. If you have family nearby or better yet mother-in-law then confess your situation and say you need help.

When my old man was 33 he was laid off with five hungry kids and a mortgage payment. The economy had hit a recession. My mom didn't work. He took two jobs. One at the Boys Club cleaning bathrooms and the other at the R.R. doing who knows.

But before he took those two jobs our family went on welfare for like five months bcs the job market was so tough. And, at some point he had to sell the house at well below market value.

My dad refers to that period as the abyss in which he never thought he would recover. Also, going on welfare was a huge hit to his self-esteem. He was an immigrant from Guatemala who never took a handout and had been working since he was 12. He did recover of course.

Please take another job and sell well below market value. Remember you are slowly being pushed into a corner surrounded by quicksand. When it comes to house pricing your only choice is to sell quickly bcs you don't have the cash flow to sustain two to four months on the market. Your competitve advantage over your peers is that you are hungry to sell and do it by pricing well below market value.

I sold a home in August 05. We set our price at 569k about 10k below market value. We got two offers. One for 580k and another for 605k. We didn't take the 605k bcs I felt it was too risky. 100% I/0 and $1,000.00 down. The other offer was 15% down and a more conventional loan. When I took a look at both these offers I thought of something my best friend is fond of saying 'Pigs get fat and hogs get slaughtered.'

Please don't get slaughtered, and leave getting fat for another day.

1/23/2006 10:31 AM  
Anonymous Anonymous said...

I am curious -- what do the readers of this blog feel is a reasonable price/income ratio for purchasing a home? I thought the old rule of thumb was 3x your gross income, and that still feels about right to me. But I have friends who are buying into homes at 4, 5, even 6x their income... what's the "magic number" ???

1/23/2006 11:03 AM  
Blogger Wes D said...

OP - Good luck, sounds like a very tough situation. With few exceptions, everyone I know (and myself) is leveraged to the max too (I'm in the mid/upper 20s). I'm a renter and got into some debt but I am working my way out slowly. It would be nice to be able to tap some home equity to pay off everything but I don't have that option and don't have the potential heartache that will come with this bust.

SoCal - Great stories but be careful who you provide advice to, especially financial guidance. I mgiht be overreacting but people act irrational when their back is against a wall. If you give someone advice and they act on it to their detriment, you may find yourself on the receiving end of a lawsuit. Hopefully this would never happen but it may so keep it in mind. When it gets ugly everyone is going to want to blame everyone else except themselves. That's a given in every bust.

1/23/2006 11:09 AM  
Anonymous Anonymous said...

Wow this hits close to home. A family member of mine is a newbie loan officer (2 yrs or less exp). He just traded up to a 700k home (Interest only ARM), bought all new furniture(0%financing), took equity in new home and just purchased another used home (POS) for a flip, and currently is on vacation in Europe with the family. All equity funded. I am going to print this story and deliver it to his mailbox. Maybe, just maybe, he will wake up from his own fantasyland bubble before its too late.

1/23/2006 11:34 AM  
Blogger Scott said...

1. Sell your house, put it on the market for $600K. (Or whatever price will GUARANTEE a quick sale... may $575K?)

2. Get a part-time job. It can be crap work, like manual labor on the weekends, but bring in some extra stuff.

3. Pay just the minimums on your consumer debt and pile up some cash to buffer unexpected emergencies that are all too common with first time parents and babies and getting laid off.

Best of luck, I'm glad you are man enough to identify the problem and work toward fixing it, rather than continuing to go into debt, borrowing from family/friends, etc.

1/23/2006 12:24 PM  
Blogger drwende said...

FSBO may be tempting because of the lower fees... but in a slow market, selling a house requires skill. The FB may want to look for a realtor who prospered during the last bust.

Find the 58-year-old realtor who's been making a good living in the region since the invention of dirt and who will aggressively market the house. Follow his/her advice on pricing and staging. Get the house sold while average time on the market is still 6 weeks rather than 6 months.

1/23/2006 1:06 PM  
Anonymous Anonymous said...

Pricing your home right the first time is key to a quick sale. Homes that have multiple price adjustments exacerbate the problem because would be buyers think there are more adjustments to come.

1/23/2006 1:09 PM  
Anonymous Anonymous said...

I have some non-financial advice to offer. This guy needs a major PR campaign to bring is wife on board with his personal bail-out plan.

Face it, to get into this pickle, neither could have been financial wizards. And based on the kind of pressure I've seen wives put on husbands to abandon caution and rationality and buy a house, I'll bet that the subject's wife will find their new austerity difficult to handle or even fathom. Putting the nesting instinct in reverse with one on the oven could cause anything from a buffer overflow to a core meltdown.

This guy needs to work hard to convince her and her family that they didn't bet on the wrong horse. Her expectations may yet survive this mismanagement but it will take work.

So he better get started. Tonight.

1/23/2006 3:46 PM  
Anonymous Anonymous said...

wow...i'm glad this guy fessed up, and i'm sure he will be, too, when this is all over. sounds like he's got a reasonable plan of action to deal with his issue.

the anecdotal stuff i've picked up in here sounds mighty ominous. it sounds a lot like 2000 with the bubble, just change the asset class from stocks to houses. what scares the hell out of me is that there is no Federal Reserve requirement for houses for home "owners" (Reg T for stocks mandates 50% initial margin and a 35% maintenance margin). this is going to be the mother of all sh*t storms. batten down the hatches folks! take a yuppie/blue collar miracle/elderly person stock market horror story from 2000, change the word stock to house, and multiply the leverage by 100 and you'll get a feel for the magnitude of how ugly it's going to be.

1/23/2006 4:06 PM  
Anonymous Anonymous said...

i wholeheartedly feel for those who had wives that pressured them on this. my wife leaned on my pretty hard to buy a house last spring. i knew that this thing was about to implode, but she said i was a greedy fool. i worked up an excel spreadsheet to illustrate to her how irrational the market in our area had gotten and she said, "let's sell and rent". the jack@$$ that bought our place paid $25,000 over the offer on the first bid on the condition that we would forgo an open house. i said, "sold to you!". we got the letter from his lender with the loan terms he was approved for and it was 7.5% on the first mortgage, 9% on the 2nd with 5% down. i almost laughed at him at the settlement table.

1/23/2006 4:15 PM  
Anonymous Anonymous said...

It is people like this that have driven the price of houses to insane levels.The ones that have jack s^%$ to put down and do not have the means to buy a house at these prices.
It has forced people like myself to have to wait aND WAIT AND WAIT FOR PRICES TO GO DOWN, but they haven't because morons like this kept the prices overpriced.
Advice oo this person sell fast and don't expect to breakeven.You are entitled to the goig price that's it. And you may like what that price is.

1/23/2006 4:30 PM  
Blogger Blogger said...

Great site. I just found it.

Glad that the FB realizes his situation.

1/23/2006 5:11 PM  
Blogger vespabelle said...

My advice for his wife is: breastfeed. She will need the mellowing hormones that are releases while nursing! (plus the cost savings over formula.)

I think the second job advice is good. A friend of mine did this with his student loan debt several years ago. However, he probably won't want to have two jobs while his baby is small.

1/23/2006 5:16 PM  
Blogger rjsasko said...

First thing is get rid of the house a.s.a.f.p. You can return to the market in a couple of years and find a great bargain.

Second thing is PROTECT both of your FICO scores! Whatever debts you are left with you are going to have to work your way out of over the next year or so and the best way to do that is not to let a draconian interest rate eat you both alive. Also easier to find a rental with good credit.

Third thing is the side work that has already been mentioned.

Fourth is GARAGE SALE BABY "STUFF" shopping. Find well-to-do subdivisions when they have their annual spring sale and chances are you will find almost new or BRAND NEW baby clothes still with the price tags on them. Pennies on the dollar. Cheap kiddie outfits start at about $15 a throw at the store and you will save big $$$ by smart buying.

Good luck!

1/23/2006 6:08 PM  
Anonymous Anonymous said...

Do what you gotta do. My wife just quit her job to stay home with our newborn and small daughter. You are going to have to re-adjust to a new lifestyle. Coupons, cutting corners and being thrifty. I make a decent salary in the finance sector but I have no problem taking on DJ gigs on the weekend nights. I get paid up to 1G a night for a wedding and under the table. I still have time to spend time with the kids. Some friends laugh at me but it sure does buy lots of pampers and similac. Swallow your pride and bite the left nut.

1/23/2006 6:09 PM  
Anonymous Anonymous said...

Here is the guy coming on with his story and some of you losers beat up on him and call him names. Shame on you.

To a guy with a tough go. Selling a house when your wife is due is a bad idea, she does not need additional stress. Let her have your child first.

How many of your $3K of monthly costs are fixed? I feel there is a BMW or something of a sort in a driveway? If so, sell it first and buy a cheaper car. Pare down everything to a dime, including cable and lunch.

Now it's the time to call the in-laws and come clean. They have a chance to help for a few months, while you work two jobs if you have to. Have your child born in your home. Put the place on the market in May and see what happens.

1/23/2006 7:13 PM  
Anonymous Anonymous said...

Good point, Karen. Men can certainly make irrational financial decisions, but the SuperBowl flat-screen TV is a great investment on a 10-year I/O!

All kidding aside, I agree with rjsasko that it is important to keep your credit rating protected during this transition. It can be more difficult for some these days since credit card minimum payments have gone up, but it's best to keep those payments on time if possible. It's always easier to lower your FICO's than it is to bring them back up.

I also had a question regarding short sales, which others have mentioned here.

As I understand it, you will short the sale when the bank is willing to accept an offer that is lower than the existing mortgage? So if you owe $600K and you can only get $580K then the bank takes the $20K loss?

Is that amount that the bank is willing to accept inclusive of all closing costs, or just the sales price? It seems that may be a better way to go other than foreclosure (assuming one cannot sell a house fast enough, or at the higher price, etc).

1/23/2006 7:20 PM  
Anonymous Anonymous said...

Given all that, it still would be better to rent at half or less of your current monthly nut. I recommend trying to sell now. Unfortunately, this young and growing family became a victim of the insanity of this market here in SoCalif.
Banker's thinking. Defitist attitude never solved anything. Can not think of anything more defitist then selling home when your wife is about to give birth to your first born, dealing with hassles of house showing, moving, settling in a new place, etc.

Cut costs to the bone, sell everything you need to sell, stay put and work as hard as you can.

What positive attitude can sales guy bring to his job when he needs to sell his home under his pregnant wife?

1/23/2006 8:04 PM  
Anonymous Anonymous said...


I'm not in my 20s, or for that matter in my 30s any longer. I'm not old enough to be kindly considered "wise". In my 30s, I lost everything - no tears, a couple of regrets. I learned from all of it and made my life better than I ever imagined it could be.

Do what you need to do. Do it now. If your wife loves you, she'll respect the decision that this is for your family's survival. If she decides to leave you over this, it was never worth having in the first place.

In scenario one, you get rid of one millstone. In the second - both of them. You know how Karen's situation worked out for her...

1/23/2006 8:48 PM  
Anonymous Anonymous said...

The positive attitude he'll take to his sales job will come from being out from under a mountain of needless debt, and he'll be a less-stressed husband and a better father for it.

Skip your irony, dear. Have you ever moved a young pregnant wife from your own home to a rental? Unless you did and still married to the same woman, your advice is not worth much. He needs to wait until a child is born. His wife will always thank him for that later.

1/23/2006 9:30 PM  
Anonymous Anonymous said...

Okay, folks; this is the actual FB/non-FB speaking again. Earlier, I posted. I'm seventh in the thread. I think a few folks need to go back and read the first several posts, and the e-mails I sent to socalmtgguy. Let's clarify while we're at it:

#1. I am NOT of the verge of bankruptcy here; I am simply identifying the fact that my financial situation has been corrupted over the last three months to this point.

#2. My wife didn't convince me to buy the house; we made the decision together. 'Bitchy wife' jokes are funny at times, but often lacking the whole story. My wife is COMPLETELY supportive of this plan to sell, and SHE is actually carrying the torch of a good deal of the marketing, while I look for employment, which I WILL find shortly. Thanks for the reco's on a second job: so noted.

#3. I confess I probably AM one of the contributing factors to the housing bubble; however, it is not right for ANYONE to say that the market price of anything is wrong. It's worth what we were willing to pay, and we paid it. Now, we have to try to cash our chips in, and see if there's more than what we came in with, or at least close enough to cover the nut. If I have to chip in a little change to sell, so be it; that is the market at work, and I wouldn't change it just to save my family's skin. That's not real life.

1/23/2006 10:07 PM  
Anonymous Anonymous said...

Actual FB/non-FB: you're right to move, even given the fact that your wife is expecting; the comment telling you to wait in the house until after the birth is absurd, and I would wager that I've been through this more recently than the commenter. (I have a sixteen month old, our first -- and we rent.) While it is certainly sleepless to have a newborn, they're also pretty simple: they pretty much sleep anywhere, they only eat one thing, and they're not mobile. The reality is that there's never an easy time to move when you have kids; the strain of moving -- even with a newborn -- is much less than the stress of having to chase the market down. (Which you will certainly have to do if you wait.)

Good luck to you; your ability to accurately self-assess bodes very well for both your financial future and your future as a father. And please keep us AFB junkies up-to-date on your progress; it will be a relief to hear when you're safe and sound in a rental...

1/23/2006 10:36 PM  
Anonymous Anonymous said...

People like this guy ought to get burnt so we can avoid another future generation greed. He was in the business and knew exactly why he got in the home in the first place- it was an investment and a gamble.

1/23/2006 11:40 PM  
Anonymous Anonymous said...

For the FB, I think you are doing the right thing in letting go of a huge financial obligation that you may or may not be able to meet in the near future. Recruiting of any kind is a tough field, and you probably won't initially make the money you think you're going to.

The guy stating that you shouldn't sell until the baby is born is wrong. First, he isn't offering to pay your monthly mortgage payment for you when or if you can't pay it. As others have pointed out, babies, while needy, do not care if they live in an apartment or a house. They simply have no concept of those things. Just food, sleep, and parents.

Good luck to you and remember to keep saving your money.

1/23/2006 11:43 PM  
Blogger Greenspan Screwed US said...

I often wonder in amazement how so many people have so easily been allowed (partly their own fault) to put themselves in such financial peril. Seems that if the Fed had just enforced Reg. X, a great deal of this mess unfolding in our country could have been avoided, but as with all bubbles, the party is just too good while it's going on and all else be damned seems to be the mantra carrying the day.....

1/24/2006 1:45 AM  
Anonymous Anonymous said...

I am looking forward to the collapse. this guy is no different than the other morons out there.
His reply is he bought the house at the going price. Well maybe the going price goes down to $500K or $400k. Then what?
People need to pay for stupid financial decisions. While prudent savers have to suffer waiting patiently for the insanity to end clowns like this have barely 2 nickels to scratch together and pay $600k for a house probably worth 30% less if idiots like this were not able to get these ridiculously stupid risky loans and bid prices up.
I am happily waiting to be vindicated for my patience and reason.

1/24/2006 7:24 AM  
Anonymous Anonymous said...


Courageous is patiently waiting while morons like this go ahead and drive the price of houses up. Courageous is listening to your friends and family and the media keep telling you just to buy because it only goes up.
Courageous is making a well informed decision while being ridiculed.
This is courageous.
I hope to watch many of these "I deserve it now" folks sink. Unfortunately someone has to win and someone has to lose and I have been on the losing end for way to long while doing the rational thing.

1/24/2006 7:58 AM  
Anonymous Anonymous said...

Money is not the issue karen because i have saved ,sacrificed and made few mistakes along the way. I could nearly buy this guys house for cash at the current so called inflated asking price. When you spend time building wealth you are not about to hand it out to some slug.You appreciate what you have and and prudent in spending it.
Houses prices have been driven up 100% in my area in about last 5 years. I am a reasonable person but when house prices reward any moron that can fog a mirror you know it's time to be very very cautious.When house prices drop to a level i deem reasonable which we are pretty far away from then i will buy, but Not before. One that sacrifices should be rewarded for their wait. I expect to by paying less and having more in my investment account to grow.

1/24/2006 8:43 AM  
Anonymous Anonymous said...

This comment is really for SoCalMortGuy is a style recommendation.

Use of the pronouns like "they" or "their" usually refer to the plaural while you are clearly referring to the singular.

The sentence "I think this person has a very good chance at avoiding FB'dom because they did not go into denial..." can be improved by simply saying "I think this person has a very good chance at avoiding FB'dom because he did not go into denial..."

Or you can keep the they if you revert to the plaural: "I think these people have a very good chance at avoiding FB'dom because they did not go into denial..."

See what I mean?

Ditto for the other theys, thems and theirs.

Grammar Cop
Just tryin' to help out

1/24/2006 4:01 PM  
Anonymous Anonymous said...

Picky, picky, picky.

While we're at it Grammar Cop,

plural, not plaural.


Spelling Cop

1/24/2006 4:32 PM  
Blogger SoCalMtgGuy said...


I completely understand.

I try to use they/their to keep the 'sex' of the individual unknown.

In this case, it came out that the brw was a he, so it didn't matter anymore.

If the individual wants to provide further information about their scenario, that is fine. I just try to keep things as anonymous as possible for the person.

Point taken. I proofread as best as I can, but occasionaly I miss things, or they don't sound right when read on the site.



1/24/2006 5:40 PM  
Blogger SoCalMtgGuy said...


You can get a loan 1 day out of a bankruptcy, but not when a foreclosure was involved.

If you went into foreclosure, you are pretty much going to have a 120 day late. That right there will kill most of your chances at getting a mortgage at any higher LTV.

I don't know all the specific laws with regards to foreclosure and if you are on the hook for more money. Ask 'scprofessor' on the new thread tomorrow, I'm sure they can help you.


1/24/2006 10:17 PM  
Blogger Drew said...


No offense, but your advice is just ridiculus. Let them foreclose on the house and just pay cash for everything???

Pay cash for what? Another house? If they had several hundred thousand in savings they wouldn't have a problem.

So you're thinking, what, that they can rent and pay cash for everything else? There's no way they're going to get a halfway decent apt with their jack up credit scores following a foreclosure.

The reason most people in your office - and in the country - care about credit scores is because MOST OF US aren't millionaires.

Your idea is fine, in theory. But not in practice.

1/24/2006 10:20 PM  
Anonymous Anonymous said...

I could nearly buy this guys house for cash at the current so called inflated asking price.

Sounds good. Ever considered getting a life?

1/24/2006 10:49 PM  
Anonymous Anonymous said...

AmazingRuss said...
Indeed...cut the guy some slack...he's just learning the hard way.

You must be kidding! Here is part of writing on this blog and it's the 7th post down:

" Secondly, I got into the biz doing loan doc sign-ups. I did two for a friend this weekend. Both couples were mid-to-late 20s, like my wife and I. Both of them are option ARMs, and their current 2/28s adjust to a double payment. Both were rolling mid-five figure credit card debt into the mortgages, too. My point is, I think my situation is now pretty much everywhere in my age bracket. All our friends that own homes are leveraged to the hilt."

He is part of the RE problem/affordability/bubble that we have today. It seems to me that his hands are dirtier than his cry for emmpathy.

1/24/2006 11:26 PM  
Anonymous Anonymous said...

"Sounds good. Ever considered getting a life?"

Sound a little jealous. Yeah about $600,000 in cash in a joint account and another appox $200,000 IN a ROTH IRA. That's right ROTH. No taxes!In 25 years this Roth will be worth about $3 million. lol!

You must be one of those show and tell types. The ones that have a mercedes they can't afford. Oh by the way i have an S-500 too. All cash bought used of course whereby the owner paid $100k for it i paid substantially less.

1/25/2006 5:43 AM  
Anonymous Anonymous said...

Sound a little jealous. Yeah about $600,000 in cash in a joint account and another appox $200,000 IN a ROTH IRA. That's right ROTH. No taxes!In 25 years this Roth will be worth about $3 million. lol!
Being this angry at people, 25 years is looking very unlikely for you, sport.

1/25/2006 7:47 AM  
Anonymous Anonymous said...

Regarding moving and babies:

The advice to do it before the baby comes is excellent.

My wife and I moved last summer, when she was 6 months pregnant.

When she got pregnant, we decided that we probably wanted to move to another town with a better school district, and that was much closer to work. I knew that meant getting our Victorian-era house in good enough shape to sell, and getting the cash together for the 20% down payment in a much more expensive house, that I would barely make it with my current equity.

So I was chatting with a friend who had a 6 month old at a party about this, and said I was probably going to wait a year before I moved, to get my ducks in a row.

His response: He looked at me coldly and said: Move NOW. If you wait it will be very, very difficult.

So, I:

1. Did minimal work to get the house in shape for showing, concentrated on curb appeal, and priced to sell. It sold in 7 days, in a town where 180 DOM times are not unusual.

2. Bought a great new house in a great location, and just squeaked by with enough equity for the 20% on the new one.

The baby came in November, and he's a complete joy, but I can't imagine what it would be like to try and move now, or even six months from now. Even if you move in your wife's eighth month, you can give her minimal physical work and be better off than waiting.

1/25/2006 8:51 AM  
Anonymous Anonymous said...

Karen you think saving $600k is easy or having about $200k is easy to put in a roth.
What i am looking forward to is raping a few assholes that drove the housing prices out of reach for many people who just want a house to live in.
I am going to bleed these mfers dry.No mercy.
No mercy for rational homebuyers trying to put their family in a house.No mercy for these greedy want it now flippers speculators.
The markets are fun and i have made this money by bucking the trend of the lemming majority.

1/25/2006 1:16 PM  
Anonymous Anonymous said...

I do not feel sorry for these folks that bought more than they can afford. i feel sorry for families that have 20% down and everytime they went to bid on a house they were outbid (over asking price), usually found out after the fact the speculator (buyer)was a flipper or 0% down jerk. I know a few families this has happened too. Do you feel sorry for them? I am pulling for these folks to be able to get a house without playing Russian Roulette with their finances.
Looking forward to a good recession to knock some senses into many.

1/25/2006 5:50 PM  
Anonymous Anonymous said...

I have no doubt that you are financially well-off, but I sense that you are spiritually bankrupt.

This is the truth that you're speaking! One of the by-products of American me-ism.

1/25/2006 8:30 PM  
Anonymous Anonymous said...

To Karen and both have me laughing outloud at 1am on the East Coast. I truly get both of your points. The bottom line is what a later post said about financially responsible people being outbid by no money zeros playing the credit game. I am a renter by choice (after having owned 2 homes) and have been lectured too many times to recall by friends/family members as to why don't I buy? Relax Karen not my ego talking but I have earned anywhere between zero in income per year to many years of $200k, $550k plus. And maybe this is just a man thing, but men know men. And initially fought with my wife about the decision to punt the house because I saw men that I just know have no coin, playing big willies and couldn't resist let'n him have it. (ps: I think my wife knew I was so serious about it that it was gonna be the house or the house and her :)

1/25/2006 10:14 PM  
Blogger Roadtripboy said...

I know your identity is supposed to be anonymous and I'm fine with that. But I don't like writing/talking as if your a non-entity so I'm going to call you Mr. Smith. :-)

Mr. Smith, I think there is a lot of good advice amoung the 80+ responses here. I must agree that you should give yourself mucho credit for recognizing that you're in financial trouble and acting to correct it before it gets out of control.

With a baby on the way, the last thing you need is added stress for you and your wife over money---as you may know, this breaks a lot of couples up. Do what ever you have to do to head this off at the pass, even if it means taking a small loss on your house. This is called "cutting your losses" before they ruin you. It sounds to me like you will have a lot of opportunity to get back into the housing market later, probably as early as the next 2-3 years since the market will correct and by that time you will be doing well enough as a recruiter to afford a substantial down payment on a nice home for your family.

I'm also appalled at the individuals who have hurled insults at you. Show me a person who has made "no mistakes" as one of the "anonymous" posters seems to indirectly claim and I'll show you a person who doesn't know his own ass from a hole in the ground. It is by making mistakes that we learn! Never be afraid to make mistakes. You already have the capacity to recognize when you've made one so you have nothing to worry about for your future! Best of luck to you and your new family!

Sincerely, RoadTripBoy

1/25/2006 10:14 PM  
Anonymous Anonymous said...

Okay i admit i made a few mistakes.
In college i slept with a girl that was to referred to as a "keg".
To many beers can do that.

1/26/2006 10:51 AM  
Anonymous Anonymous said...

are you sure it was a girl?

1/26/2006 9:14 PM  
Blogger DannyHSDad said...

To the FB/not-FB advice seekers (not just the original questioner):

I just read most of the comments but I'll focus on what I can add as a parent of 2 sons having had to move when my wife was 6 months pregnant with our first son [from Japan to N.Calif in '92, so it wasn't the best move], as well as just selling our home Nov'05 at $50K loss (after expenses).

1) Moving before having a child is easier than after, but I won't recommend moving out and away from her support network of family and/or friends. Being a U.S. citizen in Japan limited my choice of getting a job when my company choose to shutdown in Japan and I was offered to be transferred back to US.

2) In a not so hot market (as it has been in Central Texas), do everything you can to sell. And as one realtor put it, there's nothing that a lower price cannot make up for any defect.

3) After helping out a few FB/pre-FB couples at my church, one thing I noticed the most is that people aren't willing to talk to their extended families who can help the most (both money and time). Now (esp. with a child coming) is not the time to hide behind pride. And try not get any loans from family and friends: best to get direct gifts or else relationships will be stressed.

Otherwise, I agree with those who recommend:

a) cutting back expenses (yes including those necessities like coke/latte/junk food/cell phone/cable and any other penny you can cut out)

b) try to increase income (extra jobs, garage sale, sell food at yard sales :-).

c) [I'll add:] use resources wisely like reuse rain water, route the most efficient (not always the shortest since most cars waste gas [and brake pads] waiting at the lights) path to work.

We are renting now and being debt free feels GREAT! [We've always had several months of expenses in cash/CD [6-12 months CD's matures once a month] in the bank so we haven't had to cut back when I was laid off in Aug'05 and unemployed for a month.]

1/27/2006 2:34 AM  
Anonymous Anonymous said...

Very wise advice especially moving before the baby is born.
you said you lost $50k on recent home sale?
Please explain. How did you lose money?
Of course i know real estate never goes down only up so yours must be an isolated situation. thanks

1/27/2006 6:13 AM  
Blogger DannyHSDad said...

To anon: Yes, we lost about $50K in Central Texas. We bought our home brand new in the spring of 2002 ($260K). 3.5 years later (in 2005), things hadn't improved all that much (better than 2004, our realtor told us) and we ended up at closing with $210K from the buyer (so 260K-210K = 50K). At least we didn't have to bring money to the closing table....

The killer for us was that our (ex-)home is in a development still being built out. The interest rate was (and still is) so low that people would buy smaller, newer home (with less options than our home) but pay $30-50K more, since monthly payments aren't that much higher -- but wait until they get their tax bill, hah!

Another thing about homes that realtors don't normally disclose: your property taxes will almost always go up [even if your appraisal goes down, since the govmnt will usually jack up the tax rates]. One FB couple's pay increase did not match the tax rate increase and were financially squeezed ("why is my mortgage payments going up, every year?") -- in Texas we don't have income tax so guess which tax is the ATM box for the local governments?

1/27/2006 7:13 AM  
Anonymous Anonymous said...

"committed a cardinal sin: Overpricing a FSBO. Lots of interest was expressed but not a single offer. We finally listed it with an agent at the appropriate price and the house sold in less than a week with virtually no effort given by the agent (but I digress)."

Must rush to the defense of your RE Agent! We often work long and hard with clients and not gain financially. Your agent SOLD your home for you when you clearly state you could not do it by yourself! Effort was what you expended durinig your FSBO period. Your agent was paid to sell your home, would you rather it took much longer and was exciting? Believe me you really don't want and EXCITING real estate deal.
You paid for a clean fast sale and close, would have wanted a different outcome?

Seems like your agent did a good job for you.

1/27/2006 4:22 PM  
Anonymous Anonymous said...

Not sure if people/potential buyer are still reading this blog as it is a few weeks old. Believe me, if your hopes to have 2 kids in a couple of years in this 800 sq. foot home, you'll regret it. Secondly, you won't be able to afford 2 kids on your salary with your mortgage payment. My husband and I make the same salary as you with one child and live in Phoenix (definite bubble here), much cheaper area and are o.k. financially, but I could not picture how we'd be if we had a large mortgage like you'll have, even with just one kid. We live within our means, have zero debt and pay cash for everything. Have you thought about how much day care will cost, and what are the day care options in your area? If you are a hipster you may find yourself very uncomfortable with your children in a typcial suburban day care and schools, etc. wow gold opportunity! I'd say you deal with the realities of having kids first, without the added headache of a larger mortgage in a smaller house.

7/18/2006 8:21 AM  

Nice posts great stories.

1/14/2013 2:24 PM  

Post a Comment

<< Home