Money Talks, So Should You

Crisis Button: I'm moving in two weeks, but I own my home. What do I do?

George Chidi
by George Chidi, Dimespring Contributor

It’s harder to justify a move for a job these days. Only about one person in 13 moved for a job last year, according to one study. Blame the housing market. About a quarter of home mortgages are underwater right now. In 2006, the relocation rate was more like one in six.  

But if you just landed the job that changes your life and you've still got a mortgage to pay, you have options. You just need to figure it out quickly.

One bit of universal advice here — find a way to put emotional distance between you and your house. “This is no longer the home you raised your babies in,” advises Alison Benoit, investor relations manager for Cleveland Restoration Group. “Now it's an investment, and you're an investor.”

READ: Crisis Button: I'm about to miss a mortgage payment, what do I do?

Here are your options:

Keep the house, rent the house

  • Scope the rental market first. Trulia, Zillow, Craigslist and Rent.com may serve as starting points. You need to know the market before talking to a property management firm to help gauge their quality.
     
  • Hold out for a year-long lease if you can. “You shouldn't let someone move in with less than a 12-month lease,” Benoit said. You absorb additional costs with every new tenant.
     
  • Find a good property manager. If you've got two weeks to rent your house, you need a professional. You simply don't have time. A typical management company will charge a month's rent to place a tenant and five to 10 percent of the monthly rent in management fees.
     
  • Lower your expectations. It usually takes 30 to 45 days to rent out a home. An accurately priced property will rent about as fast as a bargain. High-priced and overvalued rentals take longer. “What I tell people, the higher the rent level, the smaller the pool,” said Donna Krim, general manager of Real Property Management Boston. “Not that we can't rent them, but it typically takes a lot longer to find the right person, and sometimes we don't.”
     
  • Put your money into maintenance, not cosmetics. While you may be tempted to spruce up the yard or paint the house to draw a new tenant more quickly, a maintenance problem may be more likely to drive that tenant away — a problem that's more difficult for you to manage when you're in another city.

READ: Crisis Button: Help - my car was just stolen!

  • Check your insurance and the local law. You may need an occupancy permit, and insurance coverage for a rental is slightly different than owner-residential insurance.
     
  • Consider a house swap or vacation rental as a stopgap. Services like AirBnB or HomeAway work like couch-surfing matchmakers for people in need of short-term housing. If you have a relatively attractive property and a short time horizon, a short-term lease may bridge you to your first paycheck and first real tenant. But this does   not come without risk.

Chuck the house

If your house is simply unrentable for the moment, you'll need to consider what's going to happen while you're gone. At this point you can try to sell the house or, if all else fails, give up on the house.

  • Find a real estate agent. You're looking for an agent that can prepare your house for emptiness and prep it for an eventual sale. The fewer obvious outward signs of an empty home, the less likely you'll have to deal with vandals or squatters.
     
  • Start negotiating with your bank. Consider filing for relief through the federal Making Home Affordable Act. A modification may take a few months to go through, but filing for one now might help stall an actual foreclosure.
     
  • Get your paperwork in order before you leave. To file for a modification or a refinancing, you'll need pay stubs, tax records, unemployment records, utility bills and bank statements. Depending on where you bank and how far you're moving, these records might be harder to obtain once you leave.

READ: Crisis Button: I'm about to miss a college loan payment!

  • Know if it makes any sense to even try to sell it. As a starting point, take the average number of months houses in your neighborhood sit on the market as your expected cost to carry the mortgage. Compare that to what you might expect to walk away with in a sale at current prices, if you have any equity at all. If carrying your house will probably cost more than you’ll earn, then you’re only playing to protect your credit score, which is probably going to get hammered anyway if you’re carrying a mortgage on an empty house. Again -- this is a business decision. Leave your personal feelings out of it.
     
  • Short sale vultures: If you've seen the “We Buy Ugly Houses” signs around town, you know that there's a burgeoning market for distressed real estate. Resist them. A typical sale will be for between 55 and 65 percent of actual market value, less renovation costs You’ll get nothing or close to nothing, and you’ll still take a credit hit in a short sale.
     
  • Home Affordable Foreclosure Alternatives program: If you have a documented financial hardship, consider this federal program. “Unlike conventional short sales, a HAFA short sale completely releases you from your mortgage debt after selling the property.” notes the HAFA site.
     
  • Let the house go. Consult a lawyer: It may be tempting to just turn in the keys and walk away. But in some states, your lender can foreclose and then sue you for the difference between their price on the courthouse steps and what you owe the mortgage.

 

George Chidi is a journalist and researcher in suburban Atlanta. George has covered crime, politics, technology and business over a 16-year career, most recently with the Atlanta Journal-Constitution as a growth, crime and general assignment reporter.