Is this ethical? House situation...

[Julpost]

We bought our house almost 11 years ago, understanding that it was a fixer upper. Unfortunately, we underestimated how much we would be able to do. 3 kids more later and homeschooling, we simply don't have time or extra funds to continue to work on this house. We've maintained it as best we could, we put a new roof, furnace, wood floors, paint, etc. It's not in terribly bad shape (considering 5 kids live here)...but here's the problem. Our septic is shot. And we can't get a loan to fix it. We're having to pump the tank every few months. We are also simply outgrowing this house. We have 4 kids in one bedroom and our teen in the other (it's a 3 BR). My 12 yo dd is starting to have some real issues sharing a small room w/ 3 younger siblings. She's a great girl and has always been one of the easiest to raise. She's not one to complain. But the room has 2 sets of bunks and she just doesn't have a space to call her own. I don't know what to do. We can't sell the house, because of the septic, but I don't know how much longer I can make this place work. It's getting so crowded as the kids grow, we're almost on top of each other!!

 

I was thinking tonight, what if we just gave the house back to the bank and either rented a larger house or found someone willing to do a lease to own (there seem to be quite a few of those around here). I think the bank could sell the house for what we owe on the mortgage. But would doing this hurt our neighbors property values? And is it even the right thing to do? I don't know anyone who has done such a thing and it's embarrassing to even think about it. But I'm starting to...

 

Any advice?

[Slartibartfast]

What sort of equity do you have? Would you really be willing to give up any sort of equity? You would basically have been paying rent all this time and it would really hurt your credit.

[Mrs Mungo]

We can't sell the house, because of the septic

 

I think you can sell the house, even with the septic issue. When we sold our last house we had a $1,000 carpet allowance that we gave the buyers, it was taken out of our proceeds from the sale. I don't see why you couldn't do the same with something like fixing a septic system.

Edited December 16, 2010 by Mrs Mungo

[LisaKinVA]

We bought our house almost 11 years ago, understanding that it was a fixer upper. Unfortunately, we underestimated how much we would be able to do. 3 kids more later and homeschooling, we simply don't have time or extra funds to continue to work on this house. We've maintained it as best we could, we put a new roof, furnace, wood floors, paint, etc. It's not in terribly bad shape (considering 5 kids live here)...but here's the problem. Our septic is shot. And we can't get a loan to fix it. We're having to pump the tank every few months. We are also simply outgrowing this house. We have 4 kids in one bedroom and our teen in the other (it's a 3 BR). My 12 yo dd is starting to have some real issues sharing a small room w/ 3 younger siblings. She's a great girl and has always been one of the easiest to raise. She's not one to complain. But the room has 2 sets of bunks and she just doesn't have a space to call her own. I don't know what to do. We can't sell the house, because of the septic, but I don't know how much longer I can make this place work. It's getting so crowded as the kids grow, we're almost on top of each other!!

 

I was thinking tonight, what if we just gave the house back to the bank and either rented a larger house or found someone willing to do a lease to own (there seem to be quite a few of those around here). I think the bank could sell the house for what we owe on the mortgage. But would doing this hurt our neighbors property values? And is it even the right thing to do? I don't know anyone who has done such a thing and it's embarrassing to even think about it. But I'm starting to...

 

Any advice?

 

If you think the bank could sell the house for your mortgage, why don't you talk to a realtor and try? It wouldn't hurt your credit that way, and you could walk away after the house was sold. I think it would be the way to start. Walking away from a house as the first choice just seems odd to me.

 

Secondly, why can't you get a loan to fix the septic/improve the house? FHA has a 203K loan, which can be used to refinance your current mortgage AND includes the amount you would need to fix up the house... sounds like yours might just qualify under that program.

 

If you look into the 203K program, you don't have to do *everything* -- just do enough to make the house sale-able in your market (work with a good listing/sales agent). Fix the septic. Paint, do a modest update to the kitchen (look at www.cabinetauthority.com for RTA, made-in-the USAA cabinets, literally save you 50-70% vs. something like KraftMaid, and are of comparable quality, if not better). Make sure flooring is in good condition, replace light fixtures (Lowe's are fine), and faucets... CLEAN, de-cluttered, and put the thing on the market

 

Anyhow, that's what I would suggest...long before just walking away.

 

FWIW, I *do* know how you feel. I've been living in about 1000 sq. ft. partially-finished basement for 9 years (coming March). I've got 5 children, the oldest of which is 11...

[Julpost]

We have about 45k in equity. I don't want to give that up, of course, but I'm not sure what options we have. I guess we could sell our house just for what we owe on the mortgage. We'd still lose the equity but maybe it wouldn't hurt our credit that way.

[texasmama]

When we built our home 10 years ago, our brand new septic system cost $5000. I don't know what it would take to fix yours, but you should get an estimate. It may be less than you think. You could look into a home equity loan (smalll) for this purpose if your credit is good. Are you pumping it out yourself? If not, it will get expensive to pay someone else to do that so frequently.

 

I don't know if my ideas are helpful at all, but in your situation I would want to explore all possible options before making a decision. If the house doesn't work for you then it does sound like the right decision to sell it.

 

ETA: Sorry - I just reread your initial post about not being able to get a loan to fix it. Not sure the reasons why and you don't have to go into them, but that does limit your options. As others have said, I would look into selling it "as is". You bought it that way so someone else would likely do so.

[joannqn]

Giving the deed back to the bank isn't as easy as it seems. That's what we are trying to do for different reasons, and the bank is ignoring all of our attempts to contact them about it and proceeding with collections/foreclosure instead.

[Renee in NC]

Giving the deed back to the bank isn't as easy as it seems. That's what we are trying to do for different reasons, and the bank is ignoring all of our attempts to contact them about it and proceeding with collections/foreclosure instead.

 

That is what ours did, but it hurts your credit either way. The only difference is that if you do the Deed in Lieu of Foreclosure the bank contractually agrees not to come after you for any deficiencies. However, even if they foreclose they may not come after you for the difference (and it is not taxable at this time.)

 

I would try to sell it first. You have equity that you would lose either way, but you may get what you need out of it. If not, you could try the short sale option, which will get you out from under it, but with a hit to your credit.

 

As for the septic, have you had someone look at it to see what the problem is? Our outlet hole was covered in roots, which caused the system to back up into the yard (through the top of the tank.) It was an $800 fix, which was mostly the backhoe rental. You'll pay more to have it fixed by someone else, but I would get estimates for the system anyway (you'll need them for prospective buyers.)

[Carrie12345]

I'll be upfront - I don't think it's ethical.

 

We're in a very similar situation, and I absolutely hate it. But we're in this situation because of conscious choices. We knew the house would need work. We knew baby #4 and baby #5 would have us bursting at the seams. We knew we'd have to find some serious $$$ or find a way to cope.

 

I think there's a huge difference between making personal choices and, say, getting laid off or injured, making it difficult to pay the mortgage. Faced with the choice between eating and paying for the house, sure, letting it go may be the best thing to do. Maybe even if it was a matter of the septic being completely out with no money for pumping. "Difficult" is a world away from "impossible", imo, and reneging on a loan should be reserved for the impossible.

[Renee in NC]

I'll be upfront - I don't think it's ethical.

 

We're in a very similar situation, and I absolutely hate it. But we're in this situation because of conscious choices. We knew the house would need work. We knew baby #4 and baby #5 would have us bursting at the seams. We knew we'd have to find some serious $$$ or find a way to cope.

 

I think there's a huge difference between making personal choices and, say, getting laid off or injured, making it difficult to pay the mortgage. Faced with the choice between eating and paying for the house, sure, letting it go may be the best thing to do. Maybe even if it was a matter of the septic being completely out with no money for pumping. "Difficult" is a world away from "impossible", imo, and reneging on a loan should be reserved for the impossible.

 

I am not going to judge whether it is ethical or not because I don't know all the details and I am in no place to judge anyone.

 

However, I would keep it as a very last resort. Rentals may not be as easy to find as you think, especially with bad credit. They also being their own set of headaches. Save foreclosure/deed in lieu for the "no other option" times.

 

i understand. I live in a pretty run down 30 year old trailer with 1300 square feet and 8 people. When my oldest was 14, I had 4 in one room (two sets of bunks) and he and his baby sister in the other smaller room (different house.) In this house we can't use bunks because the ceilings are too low (and the small rooms make it much more likely that the ceiling fan will hit you in the head.:tongue_smilie:

 

You get by. I don't know that I would walk away from all the work you have in it quite yet.

[the4Rs]

And if I can be honest as I rent..... I have noticed the price of rentals shooting sky high....ever since the housing market crashed. More and more people are renting because they can't buy or because they had their house foreclosed on. If you own a rental you are sitting pretty good right now.

 

So I am not sure if you'd be able to find a rental for as good a price as a house you buy.

 

I agree with trying to sell it yourself with the allowance for the septic system. It is honest and ethical all the way around.

[Cera]

If the bank can sell it for what you owe on the mortgage then you should be able to do the same. Selling it to break even or take a small loss is by far the better choice than foreclosure (I doubt the bank will just take it back because you don't want it, you will have to stop paying and they will foreclose).

[fairfarmhand]

I would not let all that equity go without a fight. Call a realtor and see what your options are. Lots of people buy houses KNOWING the problems. You could cut the asking price to make up the difference.

 

But handing it back to the bank will set you back YEARS! There are no more loans available for folks with bad credit. It will be a LONG time before you can own another house.

[plansrme]

That would be unethical. You can pay for the house; you just don't want to. Neither the bank's shareholders nor taxpayers should have to pay because you bought a house you ended up not liking.

 

You have a lot of options here; handing the house back to the bank should not be your first choice.

 

Terri

[LibraryLover]

How easy would it be to find a rental home large enough at a price you can manage? I have been having dreams of finding an extra room in my house... I could use a bit more square footage, so I do undertand.

 

If you actually have equity in this market, I would say you are ahead of the game, and to try & hold on some. You *could* use some of that equity for the septic system...which would still be better for your credit, not to mention cheaper than letting the bank take it.

 

You have to live somewhere. Maybe right now, until the market evens up a bit, you could hang tight and get the septic done.

[Parrothead]

I'll be upfront - I don't think it's ethical.

 

We're in a very similar situation, and I absolutely hate it. But we're in this situation because of conscious choices. We knew the house would need work. We knew baby #4 and baby #5 would have us bursting at the seams. We knew we'd have to find some serious $$$ or find a way to cope.

 

I think there's a huge difference between making personal choices and, say, getting laid off or injured, making it difficult to pay the mortgage. Faced with the choice between eating and paying for the house, sure, letting it go may be the best thing to do. Maybe even if it was a matter of the septic being completely out with no money for pumping. "Difficult" is a world away from "impossible", imo, and reneging on a loan should be reserved for the impossible.

:iagree:

That would be unethical. You can pay for the house; you just don't want to. Neither the bank's shareholders nor taxpayers should have to pay because you bought a house you ended up not liking.

 

You have a lot of options here; handing the house back to the bank should not be your first choice.

 

Terri

:iagree:

 

What you described for the reasons you gave is, IMHO, not ethical.

[Tammyla]

:iagree: Priced right, someone could get a great deal and you could move on.

 

I think you can sell the house, even with the septic issue. When we sold our last house we had a $1,000 carpet allowance that we gave the buyers, it was taken out of our proceeds from the sale. I don't see why you couldn't do the same with something like fixing a septic system.

[Supertechmom]

Sell it as is. We just had ours reappraised and we actually gained money on the house. We just knew we would be upside down. See what nearby homes are selling for and put it up with the understanding the septic will need to be replaced. You may get more than you are thinking. OUr last house needed a new air unit as in if we had stayed it would have been replaced or we would have had no air. ($5,000 minimum ) The buyer was trying to be a butt about it but we held firm because we listed the place below selling price and gave 3% closing to him all ready. Plus, it had a 4 year old roof on it as well as fresh paint and 6 year old carpet.

 

Sit down and really look at what you have improved and when and then come up with a reasonable selling price that takes that into account. And you may be surprised at what offers you get.

[Supertechmom]

OH! and if there is a problem with the home be bought due to regulations because of the septic, I know you can agree to pay for it to be fixed at closing. The buyer agrees to a higher selling price with the arrangement made (as in the contract is written up and included with the closing) that the workers will come in under the new owners and you foot the bill. Then you get a check for the difference and the septic guy is a cut a check then and there from the closing. Everybody leaves happy.

[Night Elf]

If you have not consulted a realtor, I highly suggest you do so. I interviewed 4 realtors before selling our last house and no one charged me for a consultation. Just tell them up front that your property is not in the best of shape, you're interested in selling, and you want to know your options.

 

Don't hurt your credit unless you absolutely have to. And don't price your house all the way down because a buyer is likely going to want to negotiate. If you're willing to sell low, price it higher and let them ask for money off the price of the house to cover the septic.

 

We're not in a tight spot like you but we still feel like our house is too small. Our property has been valued at $40,000 less than we paid for it. There is one house in the neighborhood that has been up for at least 2 years off and on. I'm not sure why they can't sell. And a house just went into forclosure up the street. Our equity is shot so we can't move.

[Mrs Mungo]

OH! and if there is a problem with the home be bought due to regulations because of the septic, I know you can agree to pay for it to be fixed at closing. The buyer agrees to a higher selling price with the arrangement made (as in the contract is written up and included with the closing) that the workers will come in under the new owners and you foot the bill. Then you get a check for the difference and the septic guy is a cut a check then and there from the closing. Everybody leaves happy.

 

Exactly, this is what I'm suggesting. This is easily done with a realtor.

 

If you have not consulted a realtor, I highly suggest you do so. I interviewed 4 realtors before selling our last house and no one charged me for a consultation. Just tell them up front that your property is not in the best of shape, you're interested in selling, and you want to know your options.

 

I agree. When the realtor comes to your home they will be able to tell you how much your house is worth. They compare to other houses that have sold in your area, they will consider improvements you have made and the specific problems that your house has. They likely talk you through a lot of that before you sign any kind of agreement with them. eta: If you haven't checked zillow, you might do so. It will give you a good ballpark starting figure.

 

Don't hurt your credit unless you absolutely have to. And don't price your house all the way down because a buyer is likely going to want to negotiate. If you're willing to sell low, price it higher and let them ask for money off the price of the house to cover the septic.

:iagree:

 

 

There is one house in the neighborhood that has been up for at least 2 years off and on. I'm not sure why they can't sell. And a house just went into forclosure up the street. Our equity is shot so we can't move.

You just never know. When I sold our house in North Carolina we worked with a really good realtor. There were only 4 houses on our street that were 4 bedrooms, one of them was our house. We had all of the cosmetic issues fixed-we put laminate down in the common areas, we changed out the fixtures from eighties shiny brass to a more modern look, we got rid of all of the tacky wallpaper and repainted in mostly neutral colors, etc. So, we did all of that little stuff, but we didn't make any BIG improvements that would raise the cost of the house beyond the normal price-point for the neighborhood. According to a realtor, those were the key factors. Our house sold in 8 days, while there were houses on a street that had been on the market for a year. Edited December 16, 2010 by Mrs Mungo

[LisaKinVA]

My aunt and uncle sold their house in 2 days. All of the realtors told them it wouldn't sell for the price they listed. They received a full-price offer. Then, they said it wouldn't appraise. They closed 3 weeks after the contract. This was in August.

 

Their house was updated, clean, but not "over-done." They had done quality work, but had laminate (not hardwoods), etc. My uncle is also very handy, he did a lot himself. It was the little things that sold the house. I think the agents in that area still have their heads spinning.

[Amy in NH]

My opinion has nothing to do with the ethics issue:

 

You have already put a lot of work into that house (everything we still need to do to ours!). You have a lot of equity built up. I think you should put your little boy in with your big boy and leave the girls in together. Get quotes, and save up (tax refund? look into an IDA?) to do the septic.

 

No child will be harmed by having to share a room with their younger sibling(s) through their teen years. JMHO.

[LazyDazy]

:iagree:Definately speak to a realtor. My dh and I have purchased homes that needed work like what yours needs without issues from the bank because we went into knowing we were buying "as is". We were prepared to make the repairs before moving in and the sellers were able to get out of a bad situation for them. We got a great deal because we were willing to purchase a home with a problem and the sellers didn't lose all of the equity the put in just because they ran out of money and couldn't complete the needed renovations. Win-win.

[tex-mex]

I think you can sell the house, even with the septic issue. When we sold our last house we had a $1,000 carpet allowance that we gave the buyers, it was taken out of our proceeds from the sale. I don't see why you couldn't do the same with something like fixing a septic system.

:iagree: Another option is to agree to a sale of the house for a lower price than your loan. A possibility of calling it a loss with taxes or the bank may waive the remaining amount and call it a loss too. HTH

[Tree Frog]

Is it possible the problem with the septic is that it's too small for your family? Could another (smaller) family could move in and not have the same problem because the tank wouldn't fill up as quickly? We had a 4 bdrm 1500 sqft house with a 1250 gal septic and were told for the number of people living in the house (5) there should have been at least a 1500 gal septic tank.

[Melissa in FL]

Is it possible the problem with the septic is that it's too small for your family? Could another (smaller) family could move in and not have the same problem because the tank wouldn't fill up as quickly? We had a 4 bdrm 1500 sqft house with a 1250 gal septic and were told for the number of people living in the house (5) there should have been at least a 1500 gal septic tank.

 

This is what my first thought was too. I've owned several homes with septics and I don't think any three bedroom home has a septic that can handle that many people full time. Has a septic company told you what was wrong with it?

Melissa

[Renee in NC]

This is what my first thought was too. I've owned several homes with septics and I don't think any three bedroom home has a septic that can handle that many people full time. Has a septic company told you what was wrong with it?

Melissa

 

Ours is smaller than that (750 gallon) and handles 8 people with no problem now. When we did have problems, it wasn't that it was filling up with solids, but just a clogged outlet. When we lived in NC, we had a 1000 gallon tank and it was fine as well.

 

I would find out from a septic company what is wrong with it before making any decisions.

[simka2]

I'm going to take a little different spin on this. We have had to relocate for employment. Our house was all set with a property management company, but a week after we had moved 12 hrs away we get a call saying they won't mange the property unless we: repaint all 3 floors, put new carpet in the basement/rec, and have it proffessionally cleaned....again.

 

We dropped the managemnet company and tried to list it ourselves...that's a nightmare. The management company is flagging my post on craigslist.

 

So we looked into realtors...we were connected to the #ranked realtor in our area. Who told us he wouldn't list the house until we replaced the carpets, repainted the main living area, and refinished the hardwoods. We said..."ummm we would be happy to consider those things at closeing, but the only thing we are willing to do right now is have the main living area painted."

 

He said he wouldn't list the property. Now were looking at someone who specializes in short sales. THIS IS A NIGHTMARE!!! and it's not our first walk in the park. We have owned and sold 3 houses. Our last house I offered to put new carpet in and my realtor was like..."no, you do that in the negotiating phase!" Now I can't even get it listed.

 

Letting it go looks really good right now :glare:.

 

Here's the house...

http://www.facebook.com/photo.php?fbid=1027121551486&set=a.1027117831393.2005786.1028714038

[Susan in TN]

My vote is no - not the right thing to do.

 

My 15yo ds shares a room with his 6yo brother (they share a bunk bed that is too small for his 6'1" frame). I know it's not great. And hopefully, it's not forever. But I'd start brainstorming with your family for other options, ways to make things easier, private space for whoever needs it (my dh built a simple wooden cabinet with a lock for my older kids so the youngers couldn't get into their "stuff").

 

In the meantime, you can look into selling or not. But for the future financial well-being of your family, I'd avoid doing anything like "walking away" unless you were truly destitute. :grouphug:

[MindyD]

I vote No as well. At least talk to a few realtors and see what they say.

[Harriet Vane]

There are such serious long term consequences to ruining your credit that I would not consider doing so unless I were destitute and truly had no other options.

 

Kids all over the world learn to live together and share, usually in far more confined quarters than here in America. I would advise you to find some creative solutions to make everyone fit or to sell the house as the others in this thread suggest.

 

I would not consider a rental in your situation--your house may be small, but you are building equity with it.

[Truscifi]

Try to sell it. The septic is truly not a deal breaker. Dh and I bought a house with a well that needed a new pump - like the house had no water when we looked at it, the pump was fried. We got a deduction from the purchase price for the cost of water testing and a new pump.

[Julpost]

Thanks everyone for the advice!

 

As of right now, I think we're going to try to sell the house in the spring (spend the winter paring down and organizing) and if it doesn't sell, well, we'll be thankful we have a place to live and dh has a good job. I think it's true too that the kids will survive w/the bedroom situation. It's true that it's a difficult situation not an impossible one. I helped me to hear that. It also helped tremendously to hear of others living in tight quarters. We live in a very affluent town where most people we know have HUGE homes. I did look into rental prices and we could rent a nice, larger home for about the same amount as our mortgage. I was tempted to think leaving this house behind would be an easy out. But I think that if we do all that we can to sell it, that we pray about it often, and if it still doesn't sell, I'm going to thank the Lord for having a home and learn to be content w/it. It might even be a good thing to teach the kids to be content as well. Hadn't thought of that....

 

Thanks ladies! This board has never failed me and I'm truly thankful I can come here and get so much advice so quickly!! :)