I'm not sure what the best course is for you, but I do want to say it's not fair to beat yourself up about this. I've made my share of financial decisions that looked good at the time and later didn't look so good. You've had a run of bad luck, but the pickle you're in is not the result of obviously bad decisions or stupidity. I'm sorry for you, and realize it's hard to be upbeat about this, but at least don't needlessly get down on yourself. Bankruptcy filing may be the best choice, but you need professional advice from someone who can look at all the specifics in light of your financial situation and the real estate market in your area. If I were you -- even though I know money is tight -- I'd pay for an hour appointment with a bankruptcy attorney: it could really help point you in the right direction and help you decide if that may or may not be your best recourse. You could also see about getting some credit counseling advice from a non-profit or government agency; however, be very careful here. There are many for profit businesses that pose as free services but get big fees and do little, or scam you. You are in a vulnerable position because you are stressed, so don't let that cloud your judgment, particularly if someone is offering promises that make you complex situation sound easy to resolve. I don't know what kind of city services you have, but one thing you can do is call the mayor's office and see if they can give you referrals to city agencies or other groups that can give you reliable counseling and not take advantage of you. Good luck. Here is a link that may give you some useful info.

Here is a link that might be useful: FTC

Thanks you so much for your words of comfort. It is hard not to feel like an idiot -- worse, I feel horrible because the only way I see out is to dump my responsibility (or else I might end up losing everything). Your advice is sound -- I have a friend who should be able to point me towards a bankruptcy attorney I could talk to in my area.

Thanks again.

whattodo-
Good luck with this. If everyone else had such a sense of responsibility as you seem to have, this housing crisis would not have been nearly this bad.

** Update**

Well, the news just gets better. Turns out there is a significant issue with the foundation, which is not covered by insurance. The problem is caused by the rising water table, which is not covered. No flood insurance (it's built on a hill, not a flood zone at all -- never even really thought about it).

So, now I have a house I put $50K+ into that probably was worth at least $20K less than the mortgage (which does NOT include the $50K) BEFORE the foundation issue. I don't have the money to fix the foundation (did I mention I am having surgery in 2 weeks for a torn ACL to the tune of $3K after insurance pays?).

At this point, the advice I have gotten is to collect the rent from my tenant and use the money for my medical bills, stop paying the mortgage, and offer the bank a deed in lieu or to give the home back and HOPE they don't come after me for the deficiency (if they did, I'd have to declare bankruptcy, which I don't want to do).

Is that what I should do? Should I try to sell it in the meantime (with the foundation issues)?

To add to my embarrassment -- I've never had an investment loan before, and (yes, I know it is really unbelievably dumb), I forgot to pay the property tax! I've always had that wrapped into a mortgage and I just did not think about it. Ugh.

To potentially complicate things -- the loan I have is a 12 month renewable, and I signed the renewal papers yesterday. I did not know what else to do. A mortgage broker friend said just sign them and don't say anything until I heard about the foundation (which we thought would be a week or two -- the loan was due on January 5th).

Well, at least I still have my job (for the moment).

Calgon, take me away!

I listen to Dave Ramsey on the radio, this is a typical question he gets asked. The last time he said,"sell the house." If you only get $120K then you only owe $30K and you CAN make the payments on $30K......so your credit won't be ruined and no one will be coming after you.

Here is a link that might be useful: Dave Ramsey link to ask a question...

When you sell a house the loan has to be paid in full. I'm curious as to where Nicole (or Ramsey) recommends getting the extra 30K to pay it off at closing.

Just wondering...I'm also the owner of an "evil house", but once that has not had the maintenance issues experienced by the OP. Mine is rented, but the rent doesn't cover the mortgage on it--just helps slow the bleeding.

Nicole -- I don't think I could get $120K for the house -- maybe before the foundation issues. Other houses in the neighborhood have sold in the $130K range (sans foundation issues) -- probably more like 90-100K? Not to mention NOTHING is selling (so it seems) in my area. My renters will be gone in May and I cannot cover 2 mortgages. I have already invested $50K in the house that I have lost.

If I could find a buyer, I would be willing to approach the bank for a Short Sale -- if they accepted, hopefully they would agree not to pursue the discrepancy (the difference between the mortgage and selling price). But, who would buy a house with major foundation issues (when there are so many healthy houses for sale so cheap)?

Revamp -- sorry to hear you also have an 'evil' house! It's no fun. I keep hoping mine will get struck by lightening or something (with no one inside, of course!). It's worth a lot more dead than alive! Hang in there! Maybe we'll both get lucky. :)

what....you have 2 houses....so take out the 30K loan on the house your living in. A short sale does effect your credit, so it would be a last resort, but doable if needed. If it's the water table that's effecting your house, chances are all the homes around it are effected. So if someone wants to live in this area they buy a home and put in a sump pump. Oddly enough people will buy a house with problems because they like it. It's an emotional decision....."the house needs me." Put it on the market ASAP so you can get rid of this money pit!

lol@ 30K loan on house I'm living in. I don't know if whattodo's situation is any better than mine, but I'm in Chicagoland and home values have dropped over 30% in my area. There's no equity to pull from.

wow.....sorry to hear that revamp. I really "do" understand. Sell whatever you can and try to get out of debt. I'm into the Dave Ramsey thing. Maybe I can turn you on to this guy and he can help you? It's a debt free lifestyle and I've embraced the idea from the get go. It's very liberating not to owe money. Dave Ramsey is on the radio, on TV and has seminars and books.

Here is a link that might be useful: Dave Ramsey help......

No need to drink the kool-aid here. Dave Ramsey has done a lot of good for people who otherwise would still be financially lost, but his type of intervention (all cash, no debt) just isn't the best advice for people who are able to responsibly handle credit.

I hope the economy turns around and I can get out from under the burden of being a landlord (not my idea of fun), but in the meantime the bills are paid and I hold only "good" debt in my name (mortgage, student loans).

Congrats on your accomplishment of debt free living--it's not a claim many can make nowadays.

Nicole --

I'm with revamp -- there is no equity to tap into in the house I live in.

I think Dave Ramsey is great -- actually, he's a friend of the family and a super nice guy. I would love to be debt free - unfortunately, the last 3 years have been one financial disaster after another (divorce, ex basically stealing $30K, car catching on fire and totalled, 3 months out of work, medical bills, and the 'evil' house). Realize that the debt I have now is directly connected to the money I have put into the 'evil' house.

I have pretty much decided the only thing I can do is give the house back to the bank. It is probably not the MOST responsible thing, but I am not willing to lose everything I have (including the home I live in) for the 'evil' house. The foundation issue is the last straw for me. I am going to focus on repaying the money I owe because of the retaining wall and my other debt.

Right or wrong, I guess I am justifying giving it back because I feel like I have done everything I can to get the house in shape and sell it. I made mistakes, but I really felt like what I was doing was the right thing. I am giving the bank a house I put $50K into that I will never get back.

Ultimately, I hope that the guilt of defaulting on the loan will be overshadowed by the relief of not having the financial and emotional pressure of owning two homes and being a landlord.

Revamp -- thanks again for the sympathy. I hope you are able to sell your 'evil' house soon!

Whattodo2012,
You are doing the right thing.
WHen it comes right down to it, it's only money.
THey can't get blood out of a stone.
I totally understand your situation, so do it and don't look back.
Regret is a double negative, so happier days are in front of you!
Good Luck to you.

I agree with buttfly. Just get rid of the dam thing and move on.

Jane

If you can get out from under this house, you should. However, don't think that giving the keys to the bank is going to clear this debt. If you have other assets, they will come after you for their losses. Your best bet is to negotiate with the lender for a short sale. If they agree, you'll walk away relatively intact.

Not to beat a dead horse, but your mistakes with this rental started way before the foundation. You spent way to much on improving a rental. 50k in cosmetic improvements on a 100k house doesn't make economic sense even in a good rental market. There isn't anything you can do about that now, but maybe someone reading this won't make the same mistake. If you are going to own rental property, the only way to make money is to keep your expenses low. The margins are inherently tight as is, so every extra expense just takes money out of your pocket.

thanks Jane and butterfly -- I appreciate the encouragement.

Bill --

Fortunately (really, unfortunately) I do not have any assets for them to come after. In fact, I meet the requirements to file Chapter 7 if I wanted to (I don't).

I know I made mistakes with the house -- although when I refinanced (to get rid of ex), the house appraised for $190K (which even I thought was high!). I knew I would put around $20K into it, but I really thought I could get it back. Then the market turned, repairs cost more than I anticipated, and the retaining wall (1500 square feet of it) gave up the ghost (definitely NOT planned on -- $25K). I never wanted to be a landlord (and freely admit I suck at it). I did not want to have a rental -- I just rented it out because it did not sell. :) I will NEVER again have a rental or be a landlord -- I am just not cut out for this sort of thing.

If I had to do it again, I would have painted the house and tried to sell it as-is (without the financial investment) and taken what I could get for the house. You are right -- I did it all wrong. Expensive lesson!

I am hoping the bank will agree to forgive whatever discrepancy there might be once they sell the house. If not, I will most likely have to file bankruptcy. Ugh.

I hope someone can learn from my mistakes! :) I like to think I have!

OP - You need to get out from under this house, if for nothing else, for your own mental sanity. Your stress and worry over this situation comes through very clearly in your posts. Yes, you've made mistakes -- don't we all! -- but you need to let them go and address the situation now. Beating yourself up over it won't help.

If it were my house, I would find an agent with a lot of experience with short sales. Short sales are generally pretty painful for the buyer. If the bank agrees to a short sale and you get the paperwork done and the bank to agree to a sales price, it will be more attractive to a potential buyer.

If you are in a non-disclosure state you DO NOT VOLUNTEER INFORMATION about the condition. If you are specifically asked questions, of course you need to answer them honestly.

If your credit can take it, it is possible to do a short sale and agree to pay the bank all or part of the loss as an unsecured loan. Owing the bank $30k (or whatever) after the home is sold may be the least painless way out for you.