Q: My partner and I purchased a house when we were both in graduate school. Everything was going great – we had roommates who were pitching in and all was good. But now we’ve graduated. He may be taking a job in another city and I may be going to law school in a different state.
We put the house up for sale six months ago and so far nothing.
To top it off, I got laid off so we are living on a combination of unemployment insurance and his income. Luckily, I never carried a credit card balance above $10, so I have no big bills, aside from pending student loans.
I do not want any of us to postpone our career goals and we can’t afford to keep this house if we move away. Should we rent it out? Should we lower the asking price and take a loss? Foreclosure is out of the question, but what can we do?
- Ari, Tx
A:
Hi Ari!
Oye, you are in quite a pickle!
I know it’s in the past and you can’t change it, but I want to put on the record for other readers that I’m not a proponent of buying a property during graduate school. There is too much uncertainty about people’s career and income afterward. Who knows where life will lead you upon graduation?
Furthermore, student loans alone are almost criminal. Getting started with a job to pay off student debt is hard enough. Last thing you need is to pile on extra debt from buying property. While is school, focus on studies.
You’ll have plenty of time to purchase a home later on in your life.
The good news is that it sounds like you are not desperate yet. Your prudent fiscal decisions about credit cards and avoiding big bills have afforded you a buffer zone. You have time to experiment with different options.
In my personal opinion, it would be best to just get rid of the property.
Confer with your realtor to make sure your asking price is realistic and in line with the recent comparable sales. If it is over priced, drop it slightly under the comps to make it fly off the shelf.
Taking a slight loss from the sale may actually save you money in the long run. Each month you don’t sell it, you are paying mortgage, property taxes and insurance. If you both move away, you’ve got to tack on rental management fees and maintenance costs for tenants. That all adds up!
Accepting a slight loss doesn’t look so bad now, eh?
If you do not want to sell it, then you will have to go with the rental route.
Lease out your property if the rent can cover a large part, if not all, of the carrying costs. In a perfect world, the rent would be enough for you to break even or even make a slight profit. But most likely, the rent won’t cover everything, unless you had put down a substantial down payment when you bought the house. (I doubt you did, or else you would not have to resort to having roommates pitch in).
Nevertheless, you’ll go a little negative each month but at least it will stop the hemorrhaging.
You ought to also ask your lender for a loan modification. Warning: you will have to fill out a ton of paperwork to prove hardship as well as navigate their bureaucracy for months. But if there is a chance your monthly payments can be reduced, it’s worth a shot.
Good luck!
- Herman
Herman Chan, a realtor, has appeared on HGTV’s House Hunters, My House is Worth What, and as a commentator on other networks. Realtor Magazine called him the “Internet Sensation Videoblogger.” Chan’s columns on real estate will alternate with his video blogs on real estate every Tuesday on 365gay.
