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Author: Cradix Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127466  
Subject: Re: Thinking about voluntarily giving up home... Date: 4/26/2006 7:39 AM
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Sheesh, I leave the thread for two days and now I don't know where to begin because I've got so many replies! I love you Foolish people...

First off, thank you EVERYONE for your input! I value all comments whether they be kind, critical, or otherwise. Now, where do I begin?

Let me give those who'd like it a bit more background: The home was built in 2001, but sat for a year as a model home. We're the original owners. AFIK, it is is considered "personal property" since we lease the land and is NOT a "mortgage" per-se. I believe this is key to my original inquiry regarding volutarily allowing it to be repossessed. It's in excellent condition in a wonderful community. You can check out the Web site we created for it here: http://1642elk.com

The purchase was made somehwat out of emotion. We were paying $645 for a 636 sqft apartment on the second floor of the building where we had to walk a quarter mile from the parking lot to our door each day because parking was so bad. To go from that to 1800 sqft for not much more per month was very nice. At the time, there was no way we could get financed for a "real" home due to salary restrictions and some debt we had at the time (since paid off). I honestly thought at the time that I was throwing my money away by renting and that I would be building equity by buying this MH. I want to throw in that I did talk to our county tax appraiser who had personally been to our park. He loved the park (it is really nice... not your typical "trailer park"). He said our homes would not depreciate very much per year. I took this guy's word as gold at the time. Sure enough, he was right and our homes have not "depreciated" very much, but I have since learned a little phrase called (say it with me now) "market value"! :-) Oh man, if only I had known...

Anyway, I have never been one to "walk away" from a loan. I DON'T *want* to do that! I am considering the option of it, however, hence I'd like this thread to gear more towards that consideration since I want other thoughts on that specific matter. Basically, what *would* happen if I stopped paying the loan, and if there was a way to have the home "voluntarily repossessed" without ever being late on a payment. Read on, though...

Finances: My wife and I each have credit scores around 720. Our AGI last year (my full time job and side business) was right around $50k. We've got about $8-10k cash split between our savings, checking, and stock accounts. We've got well over 15% of my income going into retirement accounts of various sorts. We pay off our two credit cards each month (use them for the 5% cash back!). Finally, we save over $525 a month of which $175 is budgeted for our taxes & home insurance we pay annually. (We don't have an escrow account - just my 4+% APR savings accounts.) All-in-all, I say I'm trying to be as Foolish as possible, which is why I'm investigating all my options before making any stupid decisions.

The Loan: The home is currently appraised upwards of $50,000, we owe $44,000, we've had it advertised at $39,999 for quite a few months now, and we *believe* someone might take it quickly for $25,000 based on feedback received from some people (because that's what all the foreclosures are going for, or less). I think we would be *lucky* if we got $35,000 (so, no, we don't have enough cash to cover the difference yet). We're currently paying 8.75% interest (we refinanced a couple years ago when we were paying 9.9%! The cost of the re-fi has already paid for itself.) Note: We are now not advertising a price for the home, but rather saying "make offer" to generate more actual figures of what people are willing to pay.

Selling: We've been trying to sell for well over a year. We've got a Craig's List ad running most of the time in addition to a listing on mfdhousing.com. (We found that putting it in the local paper was a waste of money, but are about to start that ad running again anyway since we really want to move.) We also have the Web site I mentioned earlier: http://1642elk.com. We've had a lot of hits both on the Web and in person. It's just that by the time you include moving fees, lot rental or whatever, no one wants to pay $40k for a used MH.

Leasing: It would take $995 a month to cover lot rental, house payment, taxes, & insurance. We believe the home is worth about $700-850 a month based on several factors. Although we looked into a lease-purchase deal before (and even found a couple wanting to do it), we are extremely turned off by the idea of it for the reasons mentioned in my original post. Plus, the couple that was interested had HORRIBLE credit where the father wasn't even paying child support (big no-no in our book). Regardless, since originally posting, my wife and I have decided to re-explore that option. We're putting it out at $995 to see what kind of response that generates. My main worry is that if the new tennants didn't work out and I couldn't find a new occupant quickly, I wouldn't be able to keep paying for both loans, then I'd have to let this MH go to the bank anyway. This all depends, of course, on how my finances are whenever that day comes, but it's all the more reason why I'd like info on what would happen if we defaulted on the loan.

Inparadise: With as hard as I've worked to keep our credit score high, our credit cards paying us instead of the other way around, and our retirement accounts growing (all in my early 20's), I'd say I've been acting quite adult-like and would most defintiely agree with you that being an adult is "about being responsible for your actions, and very little to do with age". Although I sincerely appreciate your input, I do feel as though several of your comments were uncalled for and written with quite a bit of prejudice (meaning you didn't have all the info before judging.) In fact, even with this very long post, there's still a lot of info about us, our situation, and our typical way of life that we haven't told yet. Please ask more questions next time before throwing around comments like "don't you think you two need to be adults before considering having those children".

Working With Lender: The one idea that came up I didn't know was possible is calling the lender to see if they would work with us when selling the home for less than it's worth (as originally suggested by dwdonhoff). I really don't see how this would work, though. If the lender has a lein against the home, then they won't remove it until the balance is paid in full, I believe. There's no way to sell the home for less than I owe without immediately making up the difference with cash, right? More details about this potential option would be greatly appreciated.

There's so much more I could comment on, but have run out of time. We'll see what this new info brings to the table. I might post some additional followups later as I re-read everything and begin checking into everyone's suggestions a bit futher.

THANK YOU! THANK YOU! THANK YOU!

Matt
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