Reader Questions

As always, there were quite a few questions left over from my last online discussion. So here are my answers to some of them:

Q: My job ends soon (Bush Administration) and I am looking outside the area for jobs. Therefore, I need to sell my place, but as you know the prices are still dropping and buyers want more and more concessions so I may not be able to sell. Do you have any advice on how I should/could make the decision to rent it out vs. selling it? What sorts of questions should I ask and what are the issues I need to address? I'm getting concerned that my property will be an albatross, or worse an anchor keeping me in this area when I want to go to the West Coast.

A: First check around and find an experienced real estate agent who will help you price your house to sell. And by that I mean find an agent who knows your area well and will help you set a fair rather than optimistic sale price. If, after you've hired a good agent, you still can sell, you could consider renting out the condo. However the problem in many markets is homeowners can't command a monthly rent that covers the full mortgage. If that's your problem, you'll need to make up the difference when you pay your mortgage. I hope you have a cash reserve.

If you decide to rent, find out what similar homes are renting for in your area. Then there are a number of things to consider, such as getting liability coverage and whether you have money put away for maintenance costs. You might also consider hiring a property manager if you do end up moving to the West Coast. Expect to pay from 3 percent to 10 percent of the monthly rent to a property manager or company.

Most importantly if you rent, pre-screen renters, making sure to check their credit history. I once rented my condo to a friend and because we were friends I didn't check his credit history. He was the worst tenant. He was always late with the rent. Toward the end of his lease he just stopped paying. I had to call the cops to get him out of my place.

Q: How come I still see hordes of people giving away their hard earned money at Starbucks while I hear over and over about how bad things are? Since their coffees are generally about the same price as a gallon of gas, it seems like anyone still paying for them cannot claim to have it tough?

A: You can't make assumptions about the financial health of people going for gourmet coffee. Some might be in debt, others not.

Q: I am about to let my house go into foreclosure. The houses in my neighborhood have dropped down almost $200,000 from when I purchased it in 2005. I am making payments on a house that will never recoup its value. What is the point? I can move into an apartment and be able to afford food and gas instead of struggling every month. My credit rating is 784. How much would it drop if I let my house go into foreclosure?

A: If you truly can't afford the house and you can't sell it for enough to cover what you owe, then the best thing is to try to sell it in a short sale. It won't be as disastrous as a foreclosure. Either way - short sale or foreclosure - kiss that 784 credit score good-bye for a long time.

But if you can cut costs, get a roommate or even a second job, try to hold onto the house.

And may I remind you that a house isn't a slot machine. You can't pull a lever and expect money to come out of it. What's the point of keeping your home if the value has declined you ask? The point is over time a home is still the biggest asset people have that contributes positively to their net worth.

Q: Just got engaged (hooray!) No real debt to speak of between us other than tens of thousands in student loans. Should our priority be paying off these loans? Or saving to buy a place?

A: No "real" debts to speak of? Okay I'll give you a break for being in love and in denial. But having tens of thousands of dollars in student loans is a lot of debt to speak of. Then again, so many people think that student loan debt is good debt so they put it in a category of acceptable debt, even if it amounts to tens of thousands of dollars. I suppose that helps them justify paying it off over decades.

Anyway, I would pay down that real debt before buying a home. Also, be sure to put away some money in an emergency fund even while you are paying off the student loans.

Debt and Stress: Harmful To Your Health

The weakening economy is making some people sick.

If you're suffering from headaches or panic attacks, you might want to see a credit counselor instead of a doctor. Your ailments could stem from your heavy debt load and the stress that comes along with it.

One recent survey found an increasing number of people are reporting health problems because of their financial worries, Associated Press reporter Jeannine Aversa reports in Debt Hurts Your Body, Too (June 9).

The medical issues include severe depression, ulcers and even heart attacks.

Did Homeownership Goals Contribute to the Housing Crisis?

Congressional members and housing experts are saying the US Department of Housing and Urban Development "encouraged abusive lending and sloppy underwriting standards that became the hallmark of the subprime industry" reports Post staffer Carol D. Leonnig in How HUD Mortgage Policy Fed The Crisis (June 10).

I have no doubt that many federal agencies, particularly those responsible for overseeing banks and other financial institutions, failed to stop the sale of risky and complicated loans to many borrowers.

But I completely reject the notion that efforts by community groups or some federal agencies to bolster homeownership among minorities were a key factor in causing the current housing crisis. Agencies may have pushed homeownership, but they weren't pushing those crazy loans on people.

Initiatives to increase homeownership were needed and still are. Homeownership is still the biggest path to wealth in the country. Nearly 60 percent of the total wealth held by middle-class families exists in their home equity, according to United for a Fair Economy, a nonprofit, nonpartisan organization. Although home values are declining, owning a home is the path to prosperity for many people.

No Money Down

Can you believe some homebuyers can still get a mortgage loan without a down payment?

It's true according to a recent report by Post staffer David S. Hilzenrath, Mortgages With No Money Down Still Available (June 9).

Friends And Boundaries

Can you do business with a friend? I learned the hard way that sometimes you can't.

What if you don't want to do business with a friend, can you keep the friendship?

One reader wrote into Ask Amy (June 6), saying when she decided to buy a house, she didn't hire her realtor friend. Things got ugly from there.

"Sarah (the friend) has not spoken to me in nearly a year," the reader wrote to Amy. "She claims that I 'owed' her my business because of our friendship and because I knew she needed money. She says I 'betrayed' our friendship by not using her."

What do you think? Did this person betray her real estate friend? What about your own friendships? Have you found yourself in a similar sticky situation? What did you do? Write me at colorofmoney@washpost.com. Please put "Friend or Foe" in the subject line.

You are welcome to e-mail comments and questions to singletarym@washpost.com. Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

Charity Brown contributed to this e-letter.