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Do I Deserve a Bail Out or Am I Screwed?

I figure that I will never win the lottery, so I don't waste my money on it.
I grocery shop with coupons.
I bought my new TV on super sale and only AFTER my old TV died.
I buy my cars a couple of years old instead of brand new and try to pay cash for them.
I cut the grass myself.
I put away money for my daughters college fund.
I'd rather cook than go out for dinner. (Being no slouch in the kitchen helps).

I try to be responsible with money, knowing that life can change.

Some of my neighbors are always complaining about not having any money.
Some of my neighbors have brand new cars, the biggest TV's one can buy, spend the weekend at the mall and eat out a few times a week.
Some of my neighbors refinanced at the top of the market and have interest only loans at high rates. The money was spent long ago.

I have a 30 year mortgage at 5.25% that is paid on time. I secured this when I bought the house in 2001 and started paying it down like I am supposed to do.
I have a nice home that was purchased for $281,000 8 years ago. I invested another $20,000 in a finished basement. It would have cost $35,000, but I have an ultimate set of tools and mad skills.

A home in my neighborhood just a block away sold last week at the Sheriffs Auction to a third party, not the bank, for $196,000. It had a finished basement, nice landscaping, 3 car garage (mine has 2) and was the exact same model and square footage as mine. It even has the same brick and siding color. IT'S THE SAME HOUSE.

I am just wondering......now what should I do? I am invested $316,000 ++ in my house and there is a comp at $196,000.

Can I expect a bail out?
Can I expect reduction in the principal balance on my home?

Maybe I should just go spend all my money on Vegas vacations and quit paying my mortgage first. Yeah, that's the ticket.

If I don't act irresponsibly, I'm gonna end up getting screwed.

Richard F. Kruse is the President of Columbus, Ohio based Gryphon USA, Ltd. (www.gryphonusa.com). The Gryphon Organization includes Gryphon Asset Management providing receivership and consulting services in the distressed marketplace, United Country Ohio Realty & Auction Group (www.ucohiorealty.com & www.ucohioauctions.com) providing real estate brokerage and auction services throughout Ohio and OnlineAuctionUSA.com (www.onlineauctionusa.com) providing commercial asset liquidations from the Midwest to East Coast.

United Country Ohio Realty & Auction Career Opportunities Available. Call 614-885-0020 x 17

Posted by Rich Kruse on 03/15/2009 10:26 AM

Comments (9)

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9 Comments on Do I Deserve a Bail Out or Am I Screwed?

MAR

It sounds to me like you are living in a house that you can afford but it may take a while before you may want to sell it, if you don't have to.

I do remember when the equity we had in our homes was that accumulated portion of paid principle and we could not count on prices inflating every couple of years. It appears that we are back to those days, at least in the near future. Sorry about your situation, but perhaps you can take comfort in that we are all in the same boat.

Can you afford your payment? Sounds like you can.

Where else would you live? Sounds like your payment must be in the $1800 per month range, although i don't know Ohio taxes. but considering your tax write-offs, you're probably not paying much more than you would pay to rent.

Do you llike being able to finish off your basement and screw around with your mad carpentery skills without a landlord telling you you can't? Of course you do.

Will your value come back? coming from the "crazy california" mentality, I know it will. My thought - hang in there. You'll be fine eventually. For now, you're in a home you like, with a cool basement, with a payment you assumably can afford, and you control what you do in your castle.

As we have told our selllers for years, it doesn't really matter what your home is worth until you go to sell.

I realize I didn't answer your posted question... but I don't have the answer to that one!!!

Sally,

Of course we can afford the payment. We can afford a lot of things. That isn't the issue. I want the advantage of being able to renegotiate my debt, but won't get the chance because the responsible people take it in the shorts while the irresponsible people have "new programs" designed around them.

You're screwed buddy. It's your punishment for not spending every last cent you have. What were you thinking? :)

Rich,

Unless your about to announce that Melisa is having triplets, enjoy the house!

Nothing has changed! Your payment is the same. It's the same house you enjoyed so much for all these years! It's the same convenient location! It's the same schools! You now the route home from almost everywhere!

Equity is elusive and while you may have thought you has more equity two years ago, so what!

"Can I expect a bail out?

Can I expect reduction in the principal balance on my home?"

What's to bail out? You don't have a problem, and nether do most of us! It's PC to be a victim, but unless you have to move or lost you income, your problem is all in your mind.

A principal reduction? Were you planning on sharing the gain you anticipated with the bank?

Your canchess are better in Las Vegas than of getting a goverment bailout.

As to getting screwed, welcome to the club.

Bill

If it is Melisa, and they're all boys consider naming them: Larry, Moe, and Curly Joe to remind you of the administration. Or, maybe Marks, Lennon, and Hussein.

Just a thought, but if you have a mortgage, you haven't invested $316,000 in your house. You've invested your downpayment, whatever amount you've paid your mortgage down and the amount you've put into the house in improvements. Seems to me that you probably have a pretty good return on your investment.

The same people that are looking at the neighbor's house that is selling at firesale prices looked at those same houses a couple of years ago and shouted "woohoo! look how much my house is worth!"

If you aren't selling, just congratulate yourself on making a good investment. Those people getting help are not criminals, they're going through some hard times themselves. I look around at all the foreclosures and short sales in my neighborhood and wonder which ones were greedy, which ones were taken advantage of and which ones did nothing more sinister than lose their jobs or had a health catastrophe. I can't tell the difference from the outside.

Hey Rich

I have a similar situation with my wife and I. We resisted all the refinance opportunities when the House was worth nearly 75k more just a short time ago....We had seen the appreciation go up and up, but so did the rest of the area, and the house is very comfortable, in a nice neighborhood, with nice neighbors.

we too saw a house nearby, that took advantage of the "increase" in value, put in a pool, new roof, expensive fencing, upgraded all the countertops, new kitchen......and then sold at the highth of the market.... it of course went in to foreclosure in less than a year, and recently sold for a "Loss" of 90,000 from the last sales price.... Yet here we are, doing everything "by the book" saving money to do our upgrades a bit at a time with cash saved ....SO the new family moves into a very updated totally remodeled house with a payment not much more than ours.......

Yep........there is no bailout for us playing by the rules........maybe the neighbor will invite us over to swim in the pool and deck he basically got for free by buying a short sale foreclosure.....

So go spend every last cent (let the kids put themselves through college, it builds character), get a HELOC and buy some toys (I don't know about the character building qualities of this one), don't forget to max out those credit cards, then you too will be eligible for a custom made modification program!

MAR

Your case perfectly illustrates the total fubar of the situation... because all it takes in a neighborhood of 100 homes is for 3 to go bad, and screw the other 100 pretty darn well, which argues for something to try and stop that before it happens- where possible.

There is one program being discussed out there that might make sense for you, that is the giant one time REFI program, that would allow eveyone to refi at say 4.5% reducing their payments... but as for reducing your principal? That might take a "cram down." Isn't that why California's problem accelerated, many "good borrowers" making the economically rational choice of walking away from their affordable but over priced house?

All I can say is you are far from being alone- there are many who played by the rules- on their homes and maxing out their 401Ks while others went to Circuit City monthly, (Yes you do NEED a flatscreen in every bathroom) who have seen their net worth wiped out in the past 18 months.

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