Expert: Dick Dennis - 11/2/2008

Question
Hello Dick,

I purchased a home in Los Angeles in March 2007 for $520,000.  It's now
evidently worth $360,000 according to Countrywide, and $420,000 according
to the LA County tax assessor.  It's in the "better" part of Glassell Park (not
the flats), which I understood to be an up and coming area, adjacent to Mt
Washington, just blocks away from nice streets but not at all pristine (an
occasional plant is stolen, or a fence post tagged).  It's a two bedroom, one
bath, under 900 square feet.   I put 20% down and have been able to afford
the payments so far; I'm a freelancer in the film industry and there is always
some insecurity but lately I've been doing well.   However I'm on my own and
the payments seem quite high for a place like this--something I thought at
the time was just what I had to do in order to own a home.  I tried to find
something for much less but  there was just so little available at that time,
and I looked for nearly a year.  I was very tired of renting, and this may sound
ridiculous but this was in part due to my landlord who spent his days outside
my windows in the garden.  At the time I was in my late 30s and just so tired
of the renting world.  Furthermore my rent was  rather high as I had just
returned from a year in New York City where I had been caring for my
grandfather, the rents when I returned were high just as the real estate prices
were high.

I understand that I'm one of many in this situation but I've been having such a
difficult time getting my head around my situation, especially when I see
what is available now--bigger places in nicer neighborhoods-- for
unbelievably low prices!!  Intellectually I realize I've got to stop torturing
myself by looking at homes available on realtor.com, but it's easier said than
done!!   What frustrates me even more is that there seems to be no way out.  I
have 140k in the bank that could be a down payment on a second home--I
thought I could wait for prices to bottom out and at least break even--one
good investment, one bad one.  But I'm told that I must be able to show that I
could pay both mortgages on paper--already I'm on a stated income on this
home (not sure I would have qualified without it--another mistake on my
part).

I saw your post and found your link through reading this article: http://www.wisebread.com/should-we-all-just-stop-paying-the-
mortgage. As you can imagine I could relate to this post and seriously have
had the same temptation--to walk away.  I'm really at a loss and although I
take responsibility for my actions, I am trying to find a solution.  I feel this
decision affects so many aspects of my life.  I will have to work more and
harder in order to afford to stay here--I would not be so strained and
worried if my mortgage were half what it is now.  There has got to be some
sort of creative solution--I hope you can offer some ideas, point me in the
right direction, or at the least, set me straight in the way that I am thinking.  I
would really appreciate any wisdom you can offer.

Thank you very much,
Zoey

Answer
First, Zoey, I have never posted on www.wisebread.com. In fact until you mentioned it, I had never heard of it. I went over and took a look at it and saw you may have mixed me up with a Dixie-Chick. My sign on is Dixiedee13@aol.com.

Second, you are asking advise from a real estate broker for 37 years. All these people who bought houses they couldn't afford bought thinking they could shuffle that house off to a greater fool sometime in the future. It's as if everybody expected to go to Las Vegas and when they lost, they expected their money back from the house.

I am not saying buying a house is a gamble. It isn't. It need not be. Some of these Realtors are so desperate to sell houses and make a commission that they lie to you by omission.

You are buying shelter. If you want to gamble, go buy shares from the stock market. Real estate has led the way in every case year after year. Six months or so ahead of anything else that is in second place, which is usually the stock market.

If you were my client at the time you bought that house, Zoey, I would have showed you lots more houses to assure you that THAT one was way too high. You were taken I am sorry to say. You were so used to the way-out prices of New York that you figured that half a million for a 900 square foot house was a good deal.

That agent who sold you that house was a thief! Now you have to pay back that loan. Oh, by the way, I am paying on my mortgages that are under water. So, what I suggest to you, I practice myself. If I were you, I would take that $140,000 and go buy another house or two because in 10 years you are going to kiss my hands that I suggested that. No, you do not need to get a new loan to buy another house or two. I can show you how it is done. I have done it so many times.

I am here in the southwestern corner of Riverside County, probably 75 or 80 miles from you. I do wish you well.

Dick Dennis      dixiedee13@aol.com