It's not worth walking out on home loan

REAL ESTATE MATTERS

April 18, 2008|By ILYCE GLINK

The housing market malaise has some homeowners up in arms. Sure, if you're trying to sell your home to get out of financial difficulties or because you have bought another place and carrying two mortgages is killing you financially, I can understand why you're not happy.

What does not make much sense to me are the dozens of readers who are ready to hand over their property to the lenders because their home does not work for them anymore.

Where did these folks get the idea that homes are like disposable consumer goods? When they break, you throw them out. In a matter of minutes, you can get rid of the old and buy something new.

Real estate is what investment advisers call an "illiquid" investment. Historically, it has not been that easy to sell a house on a whim. It took planning, patience and a large dose of ibuprofen to get you through the long months or years (sometimes) without an offer.

But in the past 15 years, since the early 1990s, homeowners have been able to sell their homes almost on demand, and certainly within a few weeks or months. A generation of real estate agents has never known a time like this one, where homes just sit. And sit. And sit.

If you cannot sell your home, the natural inclination is to find another way to get rid of it. I understand the feeling. If you hate your car and your dealer doesn't give you a good enough offer, you can try another dealer. Eventually, when 10 dealers tell you your car is worth $17,000 and not the $20,000 you owe on the loan, you will have to make a decision: Cough up $3,000 in cash, buy a new car and roll over what is left of your loan onto the new larger loan (so you're immediately underwater on your new car) or find a way to keep the car for another few years until you have paid off a larger portion of the loan.

Why aren't more homeowners doing the same thing with their houses? Why complain about how unhappy you are instead of learning how to love the house you bought and now own (at least for another few years)?

After World War II, homebuilders put up 1,200-square-foot, three-bedroom houses with one bathroom. Soldiers and their wives moved into these suburban residences and raised their families. These homes were not considered "too small." It is what everyone had.

Today, a 1,200-square-foot condo might contain two bedrooms -- or just one. You might have two bathrooms, or a bath and a half. The typical new home has about 2,400 square feet, central air, an attached two-car garage, several bedrooms and bathrooms and a finished basement or attic.

My friend Fred has been raising his twins in an older, 1,200-square- foot house. The house is too small, he says, and they feel on top of one another all the time. They tried to sell, but there wasn't any interest. So he and his wife have learned to love what they can about the house, including the neighbors, with whom they've grown quite close. And the house is affordable.

Sometimes our brains need a little tweaking. Investments such as real estate do not always rise in value. It is difficult to find, fix and flip a house and clear $60,000 in a few months, no matter what you see on television infomercials.

If you turn over your property to your lender, it will have a severely negative impact on your credit history and score. If you are foreclosed upon, it may take years before any lender is willing to grant you a mortgage to buy another home.

So if you can figure out a way to love the house you're in, at least until you can sell or rent it, you'll be a lot happier.

Contact Ilyce Glink at www.thinkglink.com, or by mail at Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022, or by calling her radio show at 800-972-8255 from 11 a.m. to noon Sundays.

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