Our Great House Debacle
In 2006, Mr. FP and I were, for the first time ever, both fully employed. We were 25/26 and had been married for five years. We were tired of living in apartments, so we decided to buy a house. And we wanted to have a family in a few years, so we bought a four-bedroom house.
Three years later, we no longer wanted to live in south Georgia, where both our house and our jobs were located. According to conventional wisdom, this should not have been a particular problem. We had lived in the house for over three years, and it was a nice house in a desirable school district, so we should have been able to sell it and turn a small profit. We put the house on the market, got jobs out of state, rented an apartment, and moved away, confident that the place would sell soon.
But you can add, right? 2006 + 3 = 2009 and looming housing crash. We had no idea, and our real estate agent appeared to have no idea, that the rules had changed. We were underwater on our house; we owed more than it was worth. To make a long story short, after eight or nine months we fired our old agent, stopped paying the mortgage, and pursued a short sale. We found a buyer quickly at that price, the bank approved the short sale in record time, and the whole thing was over in a few months. The bank wrote off the missing money and the federal government magnanimously agreed not to charge us taxes on this forgiven debt.All Categories
What we had done wrong: Bought a house with only 5% down, allowing the slightest market fluctuation to put us underwater. Did not pay down the balance like we were supposed to do to get rid of our PMI. Bought a house in a place before we had lived in it long enough to really commit. Made a precipitous move out of the house.
What we did right: Kept our retirement accounts. Even in the darkest moments of this whole debacle, our net worth was never negative. When we ran out of liquid money, we did not cash in our 403(b)s. And we never attempted to rent the house out as a stopgap. Had we done so, there’s a good chance that the mortgage company would have refused the short sale (seeing it as an investment property) and we would have wound up in foreclosure.
Aside from the retirement accounts, we lost every penny that we had ever possessed. We had made some bad financial decisions in the past, but none of them really mattered, because if we had had more money, we just would have lost it, too. We also, of course, lost our good credit, which we are still rebuilding. I don’t indulge in much regret, as every “error” is part of what led me to where I am now, but I do regret–and feel ashamed–that I borrowed money and didn’t pay it back.
The funny thing is, I couldn’t get pregnant in that house. Tried for a full year, charts and Robitussin and the whole nine yards, nothing. That yellow-painted bedroom just sat empty. Didn’t get pregnant until we were living in a one-bedroom apartment and going broke. We moved into a rental duplex in my hometown when I was four months along. Around the time the short sale went through and our credit was a goner, my nephew was born. My sister was on maternity leave and we spent lots of time together, having lunch with our grandma and taking the baby for walks. I remember that fall, if you will pardon the schmaltz, as one of the happiest times of my life, and I remember Mr. FP remarking that I had started laughing a lot more.
Turns out I was just as happy to bring home my babies (after all that waiting for Big Brother, Little Brother turned up unlooked-for a mere sixteen months later) to a duplex as I would have been in that big house. We thought we needed to have everything All Set, but there’s really no such thing anyway. We do hope to buy a house again in the future, but we’ll do so much more cautiously–make sure we like the area first, put more down, and buy only as much house as we need.
What debacles did you pass through on your way to better things? Would you go back and change them if you could, or were they too important as stepping stones?