negative equity, bought a lemon, now working over seas

blahbob

Hi, I think I first posted in the wrong place. Is now a good time to sell in order to limit damage? i.e. cut my losses and sell at a discount?

http://forums.moneysavingexpert.com/showthread.html?t=1030685

Thanks

Chris

GDB2222

Hmm, you have a really big problem. You paid £133k, and if I understand correctly you owe around £120k on the mortgage.

One of your choices seems to be to sell now, at maybe (I speculate) £90k, leaving yourself with say £30k shortfall on the mortgage. In that scenario, do you have the £30k?

Another choice is to wait a while, then sell, and you may get even less.

Another choice is to keep pumping money into the situation to pay the shortfall on the mortgage for maybe the next 10 years. Who knows?

I would try to find out what, really really realistically, you can get for the property on a quick sale, and that information may help you to narrow down your options.

One final thought: Move to yet another country, without leaving a forwarding address, and change your name. Alternatively, consider declaring bankruptcy, as it only takes a year to get a discharge. (I have no idea about Belgian law, of course.)

blahbob

Looks like I'm one of those statistics... I cant believe this happened to me, I previously sold in Dec 06 and sat on my deposit for 6 months. If only ... (its too late now).

HammersFan

My advice would be to hold onto the property as long as you can. Bring the rent up little by little. There are people around who have made very good money by hanging in there when the market gets rough - If you think where average wages are going to be in around 10 years, 133k is not going to seem like very much at all. I would think really hard before leaving yourself many thousands out of pocket because of worries about where the market MIGHT go. Good luck with whatever you decide.

keeprenting

HammersFan wrote: »

My advice would be to hold onto the property as long as you can. Bring the rent up little by little. There are people around who have made very good money by hanging in there when the market gets rough - If you think where average wages are going to be in around 10 years, 133k is not going to seem like very much at all. I would think really hard before leaving yourself many thousands out of pocket because of worries about where the market MIGHT go. Good luck with whatever you decide.

I don't agree with this. I would sell. You have made a loss on the property but nothing can change that now. Holding on to a depreciating asset as its value plummets is about the worst thing you could do. Most people have a real psychological difficulty with crystallising a loss, but this would be the rational thing to do IMHO.

neverdespairgirl

The economics of it are a guess - in the long, long term, the place will recover its value, but the long-term could be a long time, and you'd be subsidising the place until then.

I think it's also a matter of your attitude to risk. Personally, I'd sell up and take the hit, because I'd hate to be worrying about it.

HammersFan

keeprenting wrote: »

I don't agree with this. I would sell. You have made a loss on the property but nothing can change that now. Holding on to a depreciating asset as its value plummets is about the worst thing you could do. Most people have a real psychological difficulty with crystallising a loss, but this would be the rational thing to do IMHO.

"nothing can change that now". How can you KNOW the future? By selling now there's a definate loss. By not selling there is the chance of a gain. Selling now is a very timid strategy. But I can see the logic in it, just taking such a hit would put the OP on their heels for a very long time. Debates about the validity of various price indicies and pace of decline have be had ad nauseum...but keep in mind that recent figures from Halifax and Nationwide are based on very small sales volumes. Land Registry figures showing falls of > 8-10% YoY before worrying that things were as bad as the OP seems to think.

HammersFan

neverdespairgirl wrote: »

The economics of it are a guess - in the long, long term, the place will recover its value, but the long-term could be a long time, and you'd be subsidising the place until then.

I think it's also a matter of your attitude to risk. Personally, I'd sell up and take the hit, because I'd hate to be worrying about it.

Would you really do that? Take a hit of many thousands when there was a prospect that you wouldn't take a hit at all? It is one thing to think it, quite another to actually do it.

blahbob

I think I'm going to try holding on to it. If things get really bad I can move in with my parents and pump 75% of my salary in to it for a couple of years (doing this for 5 years I could half the mortgage, which is a good idea what ever the economic situation). I think I'm going to be OK.

keeprenting

HammersFan wrote: »

"nothing can change that now". How can you KNOW the future? By selling now there's a definate loss. By not selling there is the chance of a gain. Selling now is a very timid strategy. But I can see the logic in it, just taking such a hit would put the OP on their heels for a very long time.

Holding on to a depreciating asset would put the OP on his heels for far longer. If he sells, then once he has paid off the debt, he has a chance to do something useful with his money e.g. putting it into a bank where it will earn interest, rather than into a capital asset whose value is plummeting.

"By not selling there is the chance of the gain." The chance is infinitesimally small. See my reply to the second half of your post below.

Debates about the validity of various price indicies and pace of decline have be had ad nauseum...but keep in mind that recent figures from Halifax and Nationwide are based on very small sales volumes. Land Registry figures showing falls of > 8-10% YoY before worrying that things were as bad as the OP seems to think.

If you think the housing market is going to recover, you have a chance to make a killing. The markets do not agree with you - housebuilders all down >95% and the futures market is predicting a 50% drop in house prices in real terms. If the markets are wrong, and you are right, why not go and buy some shares in Taylor Wimpey or Persimmon? Personally, I would rather take out a 100% BTL mortgage to buy a new-build city centre flat at full asking price.

keeprenting

blahbob wrote: »

I think I'm going to try holding on to it. If things get really bad I can move in with my parents and pump 75% of my salary in to it for a couple of years (doing this for 5 years I could half the mortgage, which is a good idea what ever the economic situation). I think I'm going to be OK.

"If things get really bad I can move in with my parents and pump 75% of my salary into it." Things already have got really bad. The housing market is falling at the fastest recorded pace in history. It doesn't make sense to put the fruits of your labour into a depreciating asset, where your hard-earned money will just evaporate away.

It's your choice and good luck with whatever you choose to do. But I would sit down with a pen, paper and calculator and do the maths. Which option is likely to leave you better off? Maybe post your results on here so people can discuss...