I bought a house right at the peak of the market and it has lost at least 20-35% of it's value (depending on who you ask). I refinanced it which got rid of PMI, lower rate and lower monthly payments. that is good, but looks like it's still decline in value.

The problem here, is it needs lots of repairs. The question, is it really a good investment to sink money into a falling asset? We plan on living here, but if we ever had to sell it; I don't think we would get the money we put into it back.

Few things that needs fixed: Foundation is leaking, needs lot of insulation and new windows. The basement also needs to be sealed and needs a radon migration system. From estimates, it'll take about $20-30K to get it into a decent state. If we have to sell it in the next 5-10 years; I doubt we'll get that any of that back.

People just aren't interested in paying up for a dry basement, it's something they expect. In fact, it's probably a turn off that it was leaking and needed work.

We already put a new roof and new heater/air into it. If we sold now, we would still be at a huge lose.

The risk of losing the house is probably pretty low. It's about 20% of my monthly gross. So even if I took a lesser paying job we should be able to manage it.

I guess I'm a worry wart, it seems like throwing good money into a bad investment.

The other option is to sell it (at a lose probably) and get a cheap condo. The wife doesn't like that idea. It would save us tons of money and increase our monthly cash flow by a lot.

What's everyone thoughts on this? Some of these repairs shouldn't wait to long.

Right now, I would say I lost about $50K in value of home and about $25K in repairs. $75K basically down the drain if we were to sell right now.

Did you buy the home knowing about all of these faults? Did you have a home inspection done beforehand?

it's a hard pill to swallow, but the decline in value is sunk cost....

whether to trade down to a condo...you should factor in non-financial aspects of why you picked the house to begin with, despite knowing all the issues it had, to see if it is worth staying (is it in an otherwise good neighborhood, with a good school district for your kids, big enough for your growing family, etc, etc)...

If you're the type that hates mowing the lawn and doing repairs, maybe dropping the house now without sinking more money into it is ideal...

First and foremost: Your home is not an investment. It is your home.

If you can afford the payments comfortably and aren't planning on moving soon, stop worrying about what it is worth today. It will be a different amount when you do decide to more.

If you bought a brand-new car, and it needed repairs right after the warranty expired, but you owed more on it than it was worth, would you fix it and keep driving it, or look for a way to dump it and eat the loss?

Of course, you'd fix it.

If you said you were planning to sell soon, I'd suggest investigating other options. But you seem to intend to live here for a while, and have no plans to sell in the near future. So I'd consider it a "home," rather than an "investment," and spend the money necessary to make it liveable, without worrying about how much someone else would give you for it on the market today. At the time you bought it, you felt it was worth what you paid, so in that respect, nothing's changed.

Not really.

The basement they claimed to have never had a water leak. The inspector found some "potential water damage" - but they denied it.

The roof, that was old and partly due to hail. Luckily insurance covered some/most of that.

The heater was ~10 years old. It busted and would of costed a good percentage of what a new one costed.

Randon, never checked during inspection.

Insulation, don't know. I don't think so.

Wiring. The part that blew out wasn't mentioned.

This was all ~5 years ago.

well, that's debatable I bought it with another person that is no longer in the picture. The plan was she was going to pay half the mortgage payment. I know, dumb mistake; but nothing I can do about that now. She moved out 4 years ago and I held onto it because price just drop so much so quick.

First, decide if you want to move or not. Forget how much you paid and repaired, that's water under the bridge. Just decide based on current information, including: Is it appropriate for your current needs (location, size, etc)? Can you afford the payments?

If you decide to sell: it's always worth a thorough cleaning, a fresh coat of paint, minor but glaring repairs (e.g. my sister, repaired some screens recently, before putting her house on the market. not a big deal but they stuck out like sore thumbs.) It's probably not worth doing major repairs - I think you can leave those to your buyer.

If you decide to stay, do the repairs necessary to prevent further deterioration and/or keep the place livable. If you have a water problem, yes, waterproof the basement. It's only going to get more expensive if you put it off.

^ This!

The OTHER option that no one here likes to talk about is "Strategic Default." Consult an attorney on this one, but basiclly - stop paying. Live till they kick you out.

As I said, consult an attorney. Many states you can do this without issue. Others you would need to file for bankruptcy. Either way, your credit will be crap for a few years. On the upside, you may be able to walk away from all losses and repairs - legaly.

That is also an option. I'm not a big fan of the option, as my personal beliefs are against walking away from contracts when you can in fact perform. But that's just me.

Anyway, if you consider that option, you'll need to confirm whether or not your state allows deficiency judgments in residential mortgage foreclosures (some do some don't). If they do, bankruptcy is the only way to wipe it out, and if your income or assets are too high, you possibly won't qualify for a discharge of that judgment, but will be stuck with a payment plan.

95% correct. I consulted with a friend of mine on this, since I am the "strategist" of my group of friends. Even if you make a high income, mortgage debt is secured debt. They can surrender the property in full satisfaction of the loan. Of course if there is unsecured debt too, that would be added to the plan.

The debate over morality in these things is interesting to me. I feel that banks, companies, goverments etc will always choose the path that gives them more and you less... so why should anyone feel compelled to do otherwise. An example.... Banks make more money off of "Free Checking" then they ever made before, because of overdraft fees. They figured out a way to lure the less credit worthy and less-weathy, and dig into their pockets... legally of course. If this is accepted behavior then why not bankruptcy? If this is unacceptable behavior, then why would you treat an entity better then it is treating you?

The obligation was signed for, yes. But, and its a big BUT, part of the contract is the governing laws of the land. In this case, bankruptcy laws. Banks build bankruptcy senario's into their pricing models. You pay for that "out." Everyone pays for it as part of the risk premium on the mortgage. Would you avoid using a clause written in your mortgage contract that would allow you to 'walk away' free and clear? Or would you use it? Is it the fact that its not part of the mortgage document that is the hang-up, or something else?

I am very interested in this. Because every way I slice this, I don't see morality as a barrier to action...

Just my ramblings....

Like someone said above - "it is your home and not an investment". I have always had a problem with people talking about how they are under water in their homes. In my opinion, the only time that this comes into play is if you are in a situation where you HAVE to sell it and cannot get enough to pay off the mortgage.

Regardless of the repairs and the like, you bought the house now pay for it regardless of the value.

I'm not a bankruptcy expert, so I'll take your word for it. I do find that somewhat surprising though, given some of the Chpt 13 plans I have seen. But then again, in almost all of those that I have seen, the debtor wanted to keep the house (they didn't get the principal reduced to the value though). Due to the nature of my job, I primarily see these in the context of bankruptcies spurred by commercial loans secured by a mortgage on the house (and lots of credit card debt).

I'm not trying to impose my morality, just stated my opinion of it. Others are free to think otherwise. And it is perfectly legal. I just don't think it should be (especially if what you say above about turning in the property as full satisfaction). Though, I don't often use the "the other guy would do it to me, so I can/should do it to him" line of thought.

No argument there; see above about what I think it should be.
I think I can sum it up with the following: I believe in keeping promises whenever possible, not just when it is convenient for me, and breaking them otherwise. Again, that is just my opinion.

Edit: I would add one question: If you go to apply for a new home loan and tell the banker "I'll make the payments unless the property drops in value, in which case, I'm walking away and declaring bankruptcy." Do you think you'd get that loan?

I seem to have left this part out of my last post.

Yes, they do build in bankruptcy scenarios into their pricing, but up until recently, that didn't include many people who can comfortably afford to pay, but just choose not to.