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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: wondering on April 08, 2012, 09:37:02 AM

Title: sell house for a loss?
Post by: wondering on April 08, 2012, 09:37:02 AM

I bought my first home about 2.5 years ago. But I am starting to realize that home ownership is not really for me. I can comfortably pay the mortgage (20 yr amortization but I'm actually paying it off as if it is 10 yr) but the fact that I have a mortgage sometimes stresses me out (it goes in phases). I am also getting tired of all the yard and house maintenance, the inability to be away for long periods of time etc.

I have been thinking about whether I should sell the house and move back to a small rental apartment. If I did, I would lose quite a bit of money (maybe around $30-35k from 360k purchase price?) due to the falling house price and agent fees. But on the plus side, I would have the remaining ~125k equity in the home that I could invest elsewhere and my monthly cost (i.e., rent vs. mortgage interest plus property tax plus utilities plus maintenance) would drop by about $300 per month.

What do you think I should do? Just accept that a bad decision was made, take the loss, and hope to recover the lost money over the next few years by having lower monthly costs and more investment money (instead of it being tied up in house equity)? The initial 30-35k loss would be about 15% of my net worth. Or not worry so much, try to hang in there for another 1-3 years and hope that the house price goes up a bit?

I would definitely sell if I knew that I could break even. The biggest thing that is stopping me from selling is that I can't get over the thought of losing 30-35k. I also worry that by selling, I would be making a second bad/rushed decision (the first being buying the house in the first place).

Any advice would be appreciated. :)
Title: Re: sell house for a loss?
Post by: velocistar237 on April 08, 2012, 05:49:34 PM
Hi wondering, welcome to the forum.

If owning isn't for you, then I think you should sell. Financially, I don't think it will take you very long to recover, and from then on, you would be on better footing. To make sure, you should run the numbers, or have someone run them for you. This is essentially the typical buy vs. rent question in reverse, and you'll want to consider the whole picture so you make a sound financial decision. You will have to consider, among other things

First time home-buyer credit repayment if you're in the US and you took it. (You'll need to live there for three years if you want to avoid paying this back.)
Capital gains.
Mortgage interest.
Taxes, insurance, upkeep.
Cost of sale, realtor fees.
Opportunity cost - return on investments.
Cost of renting.

I hope it works out for you. I'm guessing you would break even in just a few years.
Title: Re: sell house for a loss?
Post by: Bakari on April 09, 2012, 09:25:23 AM
Have you considered renting it out to someone else?

You can potentially find a tenant who is able to do the yard maintenance.  A lot of people enjoy yard work - my mother's tenant specifically requested the privileged of doing yard maintenance (which he calls "gardening").  If you are lucky, maybe even a handy person who can do home maintenance as well, if you offer slightly below market rent in exchange.

Then of course you can go away anytime you like, and the rent checks pay the mortgage.

Granted, it can be a hassle getting a tenant in in the first place, but once you do, instead of losing money by selling, you have passive income while you wait for the market price for selling to come back up.
Title: Re: sell house for a loss?
Post by: James on April 09, 2012, 11:03:30 AM
If the hassle of owning the house is too much for you, I doubt renting would be a great improvement.  I'm in a similar spot of buying a house in the price range (more actually) about 3 years ago and now looking at selling at a loss.

I would suggest at least listing it at a price you would be willing to sell, there are buyer out there but they are few and far between.  Better to get in front of those buyers early.  Even if you don't sell the process will help you figure out the condition of your house for selling, and know what to do that help it sell in the future when you get more serious.  You can then list again next spring as the market (hopefully) starts to come back around.  But I don't think waiting for the few years necessary for the market to come all the way back would be a good move financially.
Title: Re: sell house for a loss?
Post by: drewstees on April 09, 2012, 01:29:49 PM
I'm in a very similar situation as you.  Looking to downsize and move drastically closer to work.  I now see my first home purchase (in 2008) as a mistake...but those were the times before I knew the way of the 'Stache.

Probably the biggest aspect of it for me is my own personal happiness.  Sure it's tough to swallow the loss, but I feel that my life will be better from it.  The smaller house will be easier to maintain, clean, etc. and I'll be able to bike to work.  Not to mention lower my monthly costs on a variety of things.  Also, when the market does turn around, I'll at least capture some of the gains, although to a lesser degree than my current house.

Playing the waiting game is a dangerous thing, I think.  Even if the market does turn the corner, I don't think it's going to explode right back up to where it was before it burst.  We might only see very small yearly gains.  Obviously this is highly dependent on what type of market and area of the country you're in.

The gain in Mustachian happiness outweighs the loss for me.  Hope it works out for you, whichever path you head down.
Title: Re: sell house for a loss?
Post by: salmp01 on April 10, 2012, 12:27:01 PM
I would try and sell the property if you’re not happy with it. 

Rather than renting a property for yourself you could look into buying a condo.  Not sure which area you’re in but here in Minneapolis I can find all kinds of great deals on condos.  You may even be able to pay cash for it so you wouldn’t get stressed over paying a mortgage.
Title: Re: sell house for a loss?
Post by: wondering on April 10, 2012, 08:12:04 PM
Thanks for the suggestions. It seems like I should consider selling the house even if it means taking a loss.

I wish I had come across this and other personal finance blogs before I decided to buy a house. :(
Title: Re: sell house for a loss?
Post by: drewstees on April 12, 2012, 08:24:34 AM
I wish I had come across this and other personal finance blogs before I decided to buy a house. :(

Try not to beat yourself up over it.  I agree 100% that I wish I'd come across these sites just a few years earlier.  I was really hard on myself for a while, but the main thing for me is that I learned from my mistakes.  You've learned that you don't like home ownership.  Take that lesson, and everything else you've learned with regards to personal finance, and keep growing that 'Stache! 

We all go through the process...even MMM.  (
Title: Re: sell house for a loss?
Post by: velocistar237 on April 12, 2012, 09:10:02 AM
I wish I had come across this and other personal finance blogs before I decided to buy a house. :(

YMOYL motto: "No shame, no blame." Make the best decision for the future given the present, not the past.