What Would You Do?

IrvineRenter_IHB

IrvineRenter_IHB

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MalibuRenter suggested the following question:



Imagine you have a house in Irvine. You are offered a good job out of state, making considerably more than you do now. You want to accept the job, but you have a $900,000 mortgage on a home with a market value of $700,000 at most, and you are current on the payments. As far as you can tell, your current job is secure.





What would you do?
 
[quote author="IrvineRealtor" date=1252459061]Is the mortgage recourse or non-recourse?</blockquote>


You can play it either way.



Assume it is a non-recourse purchase money mortgage. I think the intent of the question was to get people to select between their credit score (and their morality) and career advancement. Many people will be forced into that decision over the next decade or more.
 
I would tell the truth to the company doing the offerring. They may or may not be sympathetic. They may or may not help with relocation and/or offsetting a lump-sum loss and/or help with negative cash flow (assuming it can't be rented to cover the mortgage). Honesty usually produces the best result. At least you would avoid the chance of losing the new job after it's discovered what you've done.
 
Non-recourse:



Accept the job, buy a new house while my credit is good and then send the keys back to the bank (assuming it couldn't be rented for cash positive)



Recourse:



Undecided. Possibly dependent on relocation benefits
 
[quote author="IrvineRenter" date=1252458807]MalibuRenter suggested the following question:



Imagine you have a house in Irvine. You are offered a good job out of state, making considerably more than you do now. You want to accept the job, but you have a $900,000 mortgage on a home with a market value of $700,000 at most, and you are current on the payments. As far as you can tell, your current job is secure.





What would you do?</blockquote>


Another question.



What is the mortgage payment and what could I reasonably expect to rent the place out for?



Edited to Add..



Never mind the question.



If I can rent it close to a break even I keep the house and take the job.



If I can't rent it to close to the break even. I take the job and send the keys to the lender.
 
What about my housing to where I'm moving?



Usually, people need equity from one for the other so in this case... would I be renting for my new job or is there some housing they will be providing me?



Beside that information, I would do what NewSkip suggested.
 
[quote author="IrvineRenter" date=1252458807]What would you do?</blockquote>


<img src="http://somepinkflowers.typepad.com/photos/uncategorized/2008/08/22/im_outta_here.jpg" alt="" />



FWIW, Malibu Renter's scenario was exactly why I didn?t buy in ?03-on.
 
[quote author="IrvineRenter" date=1252458807]MalibuRenter suggested the following question:



Imagine you have a house in Irvine. You are offered a good job out of state, making considerably more than you do now. You want to accept the job, but you have a $900,000 mortgage on a home with a market value of $700,000 at most, and you are current on the payments. As far as you can tell, your current job is secure.





What would you do?</blockquote>


Whatever you wife wants to do? :)
 
[quote author="Anonymous" date=1252466466][quote author="IrvineRenter" date=1252458807]MalibuRenter suggested the following question:



Imagine you have a house in Irvine. You are offered a good job out of state, making considerably more than you do now. You want to accept the job, but you have a $900,000 mortgage on a home with a market value of $700,000 at most, and you are current on the payments. As far as you can tell, your current job is secure.





What would you do?</blockquote>


Whatever you wife wants to do? :)</blockquote>


/thread over.
 
[quote author="irvine_home_owner" date=1252462211]What about my housing to where I'm moving?



Usually, people need equity from one for the other so in this case... would I be renting for my new job or is there some housing they will be providing me?



Beside that information, I would do what NewSkip suggested.</blockquote>


How would that variable change your response? What about the new housing changes you decision? I never considered that where someone was going would make much difference.
 
Depends entirely on where the new job is and what the housing costs are in the area. Assuming parity or better in salary, but a much lower housing cost, I'd try to swing some creative financing. Price the current house to sell, enter into an agreement with the current mortgage holder to pay off the rest over the life of the original mortgage and then buy a new house in the lower cost area. Failing that, stick with the current job. The grass always *looks* greener on the other side, but sometimes it's just that spray seed, you know?
 
Like what nude said.



My new housing costs will affect my decision on what to do with my current housing. If the payments on my current loan can be covered by renting it out and renting a new place where the difference will cover, I may consider that and hope in X years the value of my Irvine house recovers.



If my new company gives me a housing allowance, that's even better because I don't have to worry about that difference and absorb the blow for now since my net situation has actually improved (my new housing will be free and my underwater house will be subsidized by whatever the current market rent is).



In addition, if no housing is provided, I will either have to spend savings for a down payment since I have no equity or just rent.



And let's face it... some Irvine owners never want to rent.
 
I know someone who had this happen to them. He moved to SF and kept his home in LA. He's now renting the LA home and is hemorrhaging 1400 a month. He is renting in SF.
 
As NewportSkipper said.



The more interesting question is, what if there is no out of State job. You're here, staying here, stuck with that $900,000 mortgage on a house now worth $700K. Hopefully you're already down about $200K of down payment. Perhaps you own this <a href="http://www.redfin.com/CA/Irvine/28-Teak-Brg-92620/home/5931637">house</a>.



Do you bail? Do you sit out and punish family by paying the mortgage on the $900K bill? Provided you refi'd about right, your monthly mortgage and tax is a mere $5500. Probably about $4500 after taxes.



What if you mistakenly bought <a href="http://www.redfin.com/CA/Irvine/8089-Scholarship-92612/home/12252762">this one? </a>



What if you're not out money from a down? What if you bought at $700K in 2005 and refi'd it up to $900K loan?



Do you owe it to your family to bail? Stick it to the bank as long as possible and attempt to live rent free for 12 months? Stick it to the foreclosure buyer for $5000 cash for keys? Or just suck it up and pay the bill for the next 30 years?
 
[quote author="zubs" date=1252479472]I know someone who had this happen to them. He moved to SF and kept his home in LA. He's now renting the LA home and is hemorrhaging 1400 a month. He is renting in SF.</blockquote>


I think the question of the possibility of the rent being a break-even situation is not even possible. There isn't much chance in the given situation in So Cal that the rent would be anywhere near the mortgage costs.
 
[quote author="tmare" date=1252491809][quote author="zubs" date=1252479472]I know someone who had this happen to them. He moved to SF and kept his home in LA. He's now renting the LA home and is hemorrhaging 1400 a month. He is renting in SF.</blockquote>


I think the question of the possibility of the rent being a break-even situation is not even possible. There isn't much chance in the given situation in So Cal that the rent would be anywhere near the mortgage costs.</blockquote>


I don't know if that's true. I know at least one owner whose $1MM mortgage is less than his 7-series lease payment (and less than half my rent for an inferior home). It's a 4BR/3BA place on a canyon in CDM, and he pays about $1,000/month. I think his rate is something like L+125, with no floor, interest-only for 10 years.
 
I'd rent for a year in order to ensure that the new location and job were the right fit for me (and my family, when that day comes). Thereafter, I really cannot say now what I'd do when the time came to decide.
 
[quote author="NewportSkipper" date=1252460219]I would tell the truth to the company doing the offerring. They may or may not be sympathetic. They may or may not help with relocation and/or offsetting a lump-sum loss and/or help with negative cash flow (assuming it can't be rented to cover the mortgage). Honesty usually produces the best result. At least you would avoid the chance of losing the new job after it's discovered what you've done.</blockquote>


You sound like someone who has no experience in a corporate environment. Do you think your new boss will respect you if you are underwater on your house to the point it would inhibit your ability to take the job on his/her team? In this environment????



I'd say risk telling them, and be prepared to stay put and find a better job and a second job to make the payments. The ruined credit will cripple a conventional family life and the psychological burden of the stigma could hasten onset of cancer. I think the kind of person who would be in this predicament could use the dose of self esteem that would come with retiring debts and securing their credit rating.
 
[quote author="zubs" date=1252479472]I know someone who had this happen to them. He moved to SF and kept his home in LA. He's now renting the LA home and is hemorrhaging 1400 a month. He is renting in SF.</blockquote>


Then the question is, does he net more in the new job than the old one? That is, which is greater: LA salary - mortgage or SF salary - mortgage + rental income - cost of SF rental? If the second is higher, then he made the correct choice in switching jobs and moving.
 
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